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Chapter 1009 CLP Power's Difficulties, HK Electric Breaks the Nuclear Power Dilemma!

The purpose of today's meeting is to discuss the joint venture framework for the Daya Bay Nuclear Power Plant project, not to reminisce or settle old scores.

Therefore, after a few pleasantries, everyone sat down in their respective seats, and the meeting officially began.

At 2:00 PM sharp, Director Luo of the Provincial Power Department announced the start of the meeting.

"Ladies and gentlemen, there is only one topic at today's meeting: the joint venture framework for the Daya Bay Nuclear Power Plant project."

This project has been underway for almost five years since it was initiated in 1978. Five years is neither a long nor a short time, but for Guangdong Province and for our country, it is a very long time.

The central government's attitude toward this project is very clear: it must be launched, and the sooner the better. So today, I hope we can reach a preliminary framework agreement.

It is not a letter of intent, nor a memorandum of understanding, but a binding and enforceable framework agreement.

"This is the first time we've invited Mr. Lin, so he may only have a superficial understanding of this matter. I'd like to elaborate on the current situation in Guangdong Province." Director Luo paused, his gaze falling on Lin Haoran.

Lin Haoran nodded and smiled, "I'm all ears, Director Luo, please explain in detail!"

"Since the reform and opening up, with the support of patriotic overseas Chinese businessmen such as Lin Sheng, our city and even the entire Pearl River Delta have indeed developed rapidly. Factories have sprung up like mushrooms after rain, and the GDP of Pengcheng has increased several times every year, which is gratifying."

However, due to the industrial boom, electricity consumption surged. For example, in Shenzhen, electricity consumption increased by a staggering 260% in 1982 compared to 1981.

Shenzhen has no independent power plants and relies solely on the Guangdong Provincial Power Grid and a small amount of electricity purchased from Hong Kong China Power. Many foreign-invested enterprises have suffered heavy losses due to frequent power outages.

Production lines shut down, orders delayed, customers lost—some companies even faced power outages just as they finished debugging their equipment, before officially starting production. Workers arrived but had no work, machines couldn't be used, and factories were built but unusable. These losses cannot be compensated for with a few words of comfort.

Director Luo's tone became serious as he spoke.

He picked up his teacup, took a sip to moisten his throat, and continued, "Last year we did a survey. The direct and indirect economic losses caused by the power shortage were conservatively estimated to be over one billion yuan. And that's just the figure for Shenzhen. If you include the entire Pearl River Delta, the figure would be even more staggering."

The meeting room was quiet, with only Director Luo speaking.

Those present were either government officials or business tycoons, and everyone knew what a power outage meant.

Currently, most foreign investment entering the mainland, apart from the factories under Lin Haoran's control, consists of small and medium-sized factories. For these small and medium-sized factories, a single day's production line shutdown results in losses of tens or hundreds of thousands of yuan.

This doesn't even include the penalties for delayed delivery, the long-term losses from lost customers, or the damage to the company's reputation.

Although land, rent, and labor costs in mainland China are indeed much lower than in Hong Kong, the United States, and Japan, the losses from frequent power outages completely negate these cost advantages.

Foreign investors aren't fools; they come to the mainland to invest because they want a stable, low-cost production environment.

If even electricity cannot be guaranteed, no matter how cheap the land or how low the labor costs, people will not dare to come.

This is why many foreign companies want to enter the mainland market, but hesitate after conducting due diligence.

The electricity supply is prioritized for Lin Haoran's companies in mainland China because of his significant contributions to the mainland, and because he knows that HK Electric has built six power plants in mainland China in recent years.

However, these six power stations are hydroelectric and thermal power stations, located in Dongguan, Huicheng, and northern Guangdong. They are all small in scale, and their electricity has long been integrated into the Guangdong power grid.

However, the electricity consumption in Guangdong Province is growing too fast, and these six newly built power plants are clearly unable to effectively meet the huge electricity demand of the entire Pearl River Delta.

At most, it can only guarantee the electricity supply for Lin Haoran's own factory and the basic supply for a few surrounding businesses.

"The severe power shortage is the core reason why we need to build the Daya Bay Nuclear Power Plant as soon as possible. Its advantages are very obvious: it is stable, clean, and efficient. Unlike thermal power, it is not subject to coal supply, and unlike hydropower, it is not subject to weather changes."

Once the Daya Bay Nuclear Power Plant is completed, it can generate tens of billions of kilowatt-hours of electricity per year, which will not only greatly alleviate the power shortage in Guangdong Province, but also provide enough electricity to Hong Kong, completely solving Hong Kong's future power shortage.

This is not just a matter for Guangdong Province, but also for Hong Kong; it is a major issue concerning the economic lifeline of both places. Director Luo's voice echoed in the conference room.

He looked at Lin Haoran and continued, "Mr. Lin, you're in the manufacturing industry, so you should know best what a stable power supply means for the manufacturing sector."

To be honest, last year several foreign companies moved their projects, which were originally planned to be located in Shenzhen, to Thailand and Vietnam due to power shortages. We wanted to stay, but we couldn't.

They said, "You can't even guarantee electricity, how can I produce here?" Although it was harsh, it was the truth.

We can't blame others for their circumstances; we can only blame ourselves for not solving the electricity problem properly.

Lin Haoran nodded but did not reply.

Director Luo continued, "We have made extensive preparations for the preliminary work of the Daya Bay Nuclear Power Plant, including site selection, geological exploration, environmental impact assessment, technical scheme comparison and selection, and financing scheme design. It can be said that everything is ready, and we are just waiting for the right opportunity."

However, an investment of four billion US dollars is beyond our capacity. Domestic economic reform and opening up requires money everywhere. In addition, without a blue-chip company to provide guarantees, we cannot solve the funding problem through low-interest loans from banks in France, Britain, and other countries.

Mr. Roland, Mr. Lin, I hope you can give me a clear answer today regarding the terms of cooperation: what kind of consensus can both sides reach?

At this point, he finally stopped talking and picked up a glass of water from the conference table to drink.

Laurence Kadoorie had participated in at least eight or ten consultations with the mainland, so he seemed quite at ease. He leisurely picked up his teacup, took a sip, and then put it down, his gaze sweeping over everyone present before finally settling on Lin Haoran.

"Director Luo, distinguished leaders, Mr. Lin, Mr. Chen, I'd like to say a few words."

"Mr. Roland, please speak!" Director Roland put down his water glass and gestured with his right hand.

"CLP Power has been involved in this project since 1979, and it has been more than four years now. During these four years, we have also invested a lot of time and resources and done a lot of preliminary work."

It's not that we don't want to do this project, but we need to ensure that it is commercially viable and that the risks are manageable.

Nuclear power projects are not ordinary investment projects. They are technically challenging, have long construction periods, large investment scales, and many risk factors. Problems in any link can lead to project failure.

Moreover, you have consistently refused the conditions we proposed several years ago. Our core requirements are only a few points: first, the conventional island equipment from GEC of the UK must be purchased; second, 70% of the electricity generated by the power station must be supplied to Hong Kong; third, the Chinese side must bear all risks, and CLP Power will not assume any loan risks or provide any guarantees; fourth, the financial operation must be under our control, and the mainland cannot interfere; fifth, we will only hold a maximum of 25% of the shares!

When Laurence Kadoorie got to this point, his tone was unhurried, as if he were stating something perfectly ordinary.

"If you had agreed to these conditions two years ago, I believe the Daya Bay Nuclear Power Plant would have already started construction. But now, as you know, the Sino-British negotiations have created too much uncertainty for Hong Kong's future."

Even if you agree to these conditions now, China Power will not dare to sign the document.

It's not that CLP Power doesn't want to finalize the deal, but rather that we dare not. We can't just commit to such a large investment of several billion US dollars; we have a responsibility to the many investors in CLP Power.

Now, let alone 25% of the shares, even 5% would require a shareholders' meeting to discuss and decide!

Listening to Laurence Kadoorie's words, Lin Haoran couldn't help but sigh. The Kadoorie family was unwilling to suffer even the slightest loss!

No wonder this project has been delayed for so long; they probably won't sign until the mainland compromises.

Lin Haoran had already reviewed the information regarding the conditions proposed by Laurence Kadoorie, and it could be said that every single one of them was extremely unreasonable!

For example, the first piece of equipment must be purchased from the UK. Lawrence Kadoorie claimed that CLP Power Hong Kong is subject to Hong Kong law, and the Daya Bay Nuclear Power Plant will also be subject to Hong Kong law when it sells electricity to the Hong Kong market. If the British nuclear power equipment is not purchased, the plant will not be authorized by the British and Hong Kong authorities and will be unable to sell electricity to Hong Kong.

Lin Haoran already knew that GEC's conventional island equipment had a small safety margin, low thermal efficiency, and late delivery schedule, and that Britain simply did not have mature technology for 90 kW steam turbines.

France's conventional island technology is the most advanced and mature in the world, and the mainland wants to import both nuclear island technology and conventional island technology from France.

This first condition has been debated for several years now, with neither side willing to compromise.

In Lin Haoran's previous life, the mainland was ultimately forced to compromise, purchasing conventional island equipment from GEC in the UK and nuclear island equipment from Framatome in France, forming a unique technical combination of "French nuclear island + British conventional island".

As for the second point, although Hong Kong is also experiencing power shortages, it is far less severe than on the mainland. In particular, the relocation of many factories to the mainland has not alleviated Hong Kong's power consumption, but at least the growth rate of power consumption has slowed down.

The fact that CLP Power has surplus electricity to supply the mainland gives a good indication of the current state of Hong Kong's power supply.

If Hong Kong were experiencing a power shortage, CLP Power would not be able to sell electricity to the mainland.

Both CLP Power and HK Electric are building new large-scale power plants, which have been completed in the past two years. The local power generation capacity in Hong Kong can meet its own needs and even have a surplus.

It can be said that the electricity from the Daya Bay Nuclear Power Plant is no longer a necessity for Hong Kong at present.

Meanwhile, the power shortage on the mainland is widening, and the power shortage problem in Guangdong Province will become more and more serious year by year.

Therefore, supplying 70% of the electricity to Hong Kong is clearly unreasonable and does not serve the interests of Guangdong Province.

As for the third point, the Chinese side assumes all risks and CLP Power makes no guarantees. This condition would be unacceptable in any commercial negotiation.

Cooperation means sharing risks and benefits; how can one only enjoy the benefits without bearing the risks?

The fact that the Kadoorie family made this condition shows that they never intended to have a serious discussion from the beginning, but rather wanted to find a solution that would allow them to make money and walk away unscathed.

Article 4 stipulates that CLP Power will take the lead in financial operations, which means that CLP Power will be the actual controller of the project, while the mainland government can only play a supporting role.

If this condition is met, the Daya Bay Nuclear Power Plant will be nominally a joint venture project, but in reality, it will be a branch of CLP Power.

Mainland policies, mainland land, mainland markets, and mainland loan guarantees—all in exchange for a project with which they have no actual control. Guangdong Province would never do such a losing proposition.

Article 5. In fact, the original plan of the mainland was for both parties to hold 50% of the shares, while CLP Power would only hold a maximum of 25%. Although this percentage was not high, it was not unacceptable.

The key issue is that the other conditions proposed by the Kadoorie family are too demanding. Even if they only own 25%, they still want to control the financial operations and not bear any risks.

This kind of "wanting to be a prostitute while also maintaining a virtuous image" approach is unbearable for anyone.

Too many factors have prevented the mainland and CLP Power from reaching an agreement.

The Kadoorie family was unwilling to compromise, and the mainland was also unwilling to compromise, so the project could not be implemented.

Lin Haoran leaned back in the wooden chair, his mind quickly processing the information.

He knew in his previous life that the Daya Bay Nuclear Power Plant finally started construction in 1986, a full eight years from project approval to commencement of construction.

There are many reasons for the delay, including Sino-British negotiations, the Chernobyl accident, and the nuclear phobia in Hong Kong society. However, the Kadoorie family's hesitation and demanding conditions are undoubtedly one of the important reasons.

If the mainland government hadn't been forced to make concessions on conventional island equipment due to its inability to wait any longer, this project might have been delayed even longer.

However, now that Lin Haoran has arrived, he certainly won't allow the Kadoorie family to so recklessly delay the process and make demands.

As the largest foreign investor in mainland China, his interests are intertwined with those of the mainland.

Hong Kong Electric Holdings is not CLP Power, and Lam Ho-yin is not Laurence Kadoorie.

He doesn't need to be as cautious as the Kadoorie family, nor does he need to impose a bunch of harsh conditions to avoid risks.

He has the capability to take risks, the courage to drive projects forward, and the wisdom to design a cooperation plan that is acceptable to all parties.

He glanced at Chen Shulin, signaling him to speak.

Chen Shulin understood, opened the folder, and said, "Director Luo, distinguished leaders, Sir Kadoorie, I'd like to say a few words."

Immediately, all eyes in the room were on Chen Shulin.

Laurence Kadoorie was also somewhat surprised. He had originally thought that Lin Haoran, the boss, would personally negotiate the terms when he came here.

Unexpectedly, Lin Haoran did not play by the rules at all and directly handed over the initiative in the negotiations to Chen Shulin.

This surprised him and made him feel somewhat uncomfortable.

In Hong Kong's business community, it is customary for the boss to personally handle negotiations for major projects; there is no reason to let subordinates take the lead in negotiations.

“We at HK Electric Group are also deeply aware of the power shortage problem in the mainland. Therefore, on behalf of HK Electric Group, I would like to express our support for the Daya Bay Nuclear Power Plant project to be implemented as soon as possible, and for purchasing mature and reliable technology from Framatome of France.”

Therefore, HK Electric Group is willing to provide credit endorsement for this project and undertake the day-to-day operation and management of the project company.

At the same time, we also hope to have a reasonable equity stake in this project and the pricing and allocation rights for the electricity transmitted to Hong Kong!

As soon as Chen Shulin finished speaking, a buzz of discussion broke out in the room.

The officials' faces were filled with joy.

The statement from Hong Kong Electric Group undoubtedly reassured them.

Credit endorsement, operation management, technical solutions, equity ratio, and power allocation—each of these points hits the nail on the head regarding the project's key aspects.

In particular, the fact that HK Electric Group is willing to provide credit guarantees means that the likelihood of obtaining low-interest loans from French banks has greatly increased.

With the loan secured, the project can begin.

Once the project starts, the electricity problem will be solved.

Once the electricity problem is solved, the economic development of the Pearl River Delta can accelerate.

This is a positive cycle.

At this moment, Lin Haoran also spoke up with a smile: "Regarding the loan, on behalf of Hengsheng Group, I would like to make a statement here. Hengsheng Group's affiliated banks can also provide some preferential loans for the Daya Bay Nuclear Power Plant. The loan interest rate can be implemented in accordance with the export credit interest rates of the French and British governments!"

He did not take on the entire loan amount. Although the $40 billion loan was manageable for his several banks, it was not in Lin Haoran's personal interest.

From a business perspective, this sum of money is too large, and with only a few percent profit each year, it's actually not worthwhile for Lin Haoran.

This is not a rational business decision.

Moreover, the export credit loans provided by the French government will also put greater pressure on the mainland governments, making them more cautious about the project.

Lin Haoran knew that export credit was not only a financing tool, but also a political bargaining chip.

The French government is willing to provide low-interest loans because they want to sell their nuclear island technology to the mainland; export credit is not something that can be obtained easily.

If all the loans are handled by banks under the Hengsheng Group, wouldn't France be able to sell its technology to the mainland without putting in any effort?

There's no such thing as a free lunch.

Lin Haoran neither wants to be taken advantage of nor work for others' benefit.

If the French want to make money, they have to show sincerity, offer the benefits they deserve, and take the risks they are obligated to take.

If the loans are all covered by Hengsheng Group, the French won't have to bear any risk at all. Why should they transfer the most advanced technology to us?

What guarantees that the equipment will be delivered on time? What guarantees that the project quality?

Therefore, retaining the French portion of the export credit is beneficial to the project itself. (End of Chapter)