Mr R E Adams HM Treasury
11 January 1982
EC's view is very firmly that we should not attract the risk of any of these potential bidders being excluded from tendering by our refusing to extend the date to 30 September. Our aim throughout the consideration of this project has been to treat the Island Line as a single project and to gear the terms of our offer of cover to this concept, and it was for this reason that we initially sought to choose a date which fitted in with MTRC's planned ordering period; it would have made no sense to have held the rate for any lesser period.
If we had known at the outset that the ordering programme was to extend to 30 September I have no doubt we would have recommended holding the rate for the longer period.
At present the Japanese credit insurance agency (and the one or two others who are involved) have agreed with us to hold the interest rate to 30 June 1982. There is, however, no direct undertaking given by the Japanese and others that they will refrain from extending their commitment to the old rate beyond 30 June should the need arise. Norman Thompson has told Derek March in the BTC, Hong Kong, that the offers of support he has received from Japanese officials include a commitment to the old interest rate beyond 30 June. If we were now to extend the validity period the other credit insurances agencies. would, of course, follow suit.
I should be grateful if you would now confirm that we may agree the three month extension proposed.
I might add that we are convinced that Norman Thompson and the bankers and exporters concerned continue to expect us to agree to the capitalisation of pre-commissioning interest for other Island Line cases, despite our protestations that agreement to such a concession for MetCam and the construction contract No 405 was exceptional and not to be taken as a precedent. In a letter to Keith Sedman dated 14.12.81, Derek March urges us to avoid a last minute undignified scramble to match terms offered by the Japanese and other competitors which can do so much damage to British bids when we appear, always, to be lagging reluctantly behind the competition leaders. Derek March applies this comment equally to the capitalisation of interest and extending the commitment to the old interest rate. In my view this is a very sound point, and it would be very helpful if, in addition to your agreement to the extension of the interest rate period, we could very shortly have Treasury's views on apitalisation, in the light of Bob Kemp's letter of 23.12.81 to Michael Hawtin.
Youssine
же
Rosholloway
R HOLLOWAY
cc Mr Kemp ECGD
Mr Sedman ECGD
Mr Durie PEP1
Mr Downing BOE
Mr Gowlland FCO
Mr March BTC Hong Kong
No comments yet.
Private notes are available after approval.