TNAG-2981-FCO40-1473-Guangdong-nuclear-power-station-project-1982 — Page 55

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CONFIDANTIMA

DEPARTMENT OF INDUSTRY

MEE

Room 517

Telex

Telegrams

Telephone

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Ashdown House 123 Victoria Street London SW1E 6RB

8813148 DIHQ G

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London SW1

Direct Line

01-212 5896

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01-212 7676

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Your reference

Our reference

M Boxall Esq

PEP Division

Department of Trade

Rm 232

1 Victoria Street

London SW1

Dear Mike

GUANGDONG NUCLEAR PROJECT.

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6 NED

Date

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November 1982

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6611

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The purpose of this letter is to bring you up to date on developments on this project since the informal SCAT meeting on 5 October.

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My Secretary of State's report to the Prime Minister of 29 October and No.10's letter of 2 November outlined the present position in broad terms, and the strategy for discussion at the Anglo/French Summit on 4/5 November. We are now awaiting a de-briefing on the Summit, but first reports suggest that the French were non- committal in their response to our proposals for collaboration. We shall be considering in the next few days the negotiating line we should take when Minister Li Peng visits the UK for discussions shortly; latest telexes from Peking suggest that this is likely to be on about 20 November. Given the difficulties of working closely with a nuclear partner, it is likely that we shall have to hold discussions on the conventional island only.

Turning to the question of an input of ATP into the financing of the project, I feel it would be helpful to set out the Department of Industry's view. The 5 October meeting highlighted, not for the first time, the difficulties of policy and of practice which would arise from an aid input into this project. However, while we have no policy objections to considering other sources of financial assis- tance, our first appraisal suggests that it is highly unlikely that support under the Industry Act or the Science and Technology Act could prove sufficient to make any significant reduction in the effective interest rate on export credits for the project, even for the conventional island only. Accordingly, as we agreed at the 5 October meeting, we are looking at the possibility of identifying within the conventional island contract a separate "parcel" which could be 25% aid funded. In our view such a proposal offers the best prospect of injecting a significant amount of finance into the project, should we consider that the economic and political case is com-- pelling. In investigating this possibility we are conscious of the constraints on the ATP budget, and we have followed the recent Ministerial correspondence which has indicated that a separate provision for the Guangdong project is an unlikely prospect.

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