Daily Information Bulletin - 1960s - 1963 - NOV - ENG

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MONG KONG GOVE*NMfNT 211

NFORMATION SERVICES’

DAILY INFORMATION BULLETIN

Sundnv, Fovember 24, 196 ;

Cq-TROL a- C'lrtSSS, PIVIBSffiS.

OF EL3CTRICITY SUPPLY, CJX1PANL2S

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In December 1959, th© Electricity Supply Companies Commission recommended that the two electricity undertakings, as holders of do facto monopolies of an essential public service, be compulsorily acquired in order to bring to an end the general conflict of interest between shareholder*- and the consuming public and, in particular, tho practice of tho companies whereby capital investment has been financed preponderantly from moneys paid by the consumer but this investment has not inured to the benefit of tho consumer, as opposed to tho shareholder, to the extent appropriate in a situation of monopoly.

lovornaont postponed eon.idor.Uon of tho Ccrtod.Uon's rncoonond.tions


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GA

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2

pending tho submission bv the two companies of alternative? proposals. Thcso

were received in October i960 and were rejected bv Sovornmont in January 1961 as failing to meet th<* Commission’s criticisms.

In Mav 1962, foment and the Boards of tho two companies reached provisional agreement in principle on terms for merger of the companies and for control of charges and dividends.

At an extraordinary general mooting in June 1962, views expressed by certain shareholders of the China Light ’nd Power Conpair- Limited in opposition to the terms of merger provisionally agreed by their Board shoved


that it was unlikely

secure acceptance if

In December

that tho scheme would receive sufficient support to formally put to shareholders.

To Introduce Legislation

1962, the Board of the Hong Kong Electric Company

Limited rejected proposals, which wore acceptable to the China light and

/Power P.T.O

212

2

conclusion

the future

time which

would be

accept atio to both.

Governro.it

monger for tho time

continuing operation.

to finance further expansion.

Kinor Matters

to charge a royalty.

introduction to Legislative Council in due courso.

/on increases

In consoquonce of theso avenge Government has reached the

'i

Power Company Limited, for an i;xlcpondvnt re-assossmont of terns of mergor.

that it is not possible, considering the present situation and

proscucts cf oach company t to devise terms of monger at this

has now dneidod therefore to put aside tho question of

bulne and to introduce legislation as soon as possible

designed to impose a control on tno charges and dividends of each company

separately, and to make in return a grant of franchise rights, including

certain statutory rights tv place and maintain cables and other installation?’

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in public roads anc elsewhere which, unlike other similar public utility

companies, they do not lie Id at present and which are essential to their

It is tho intention that control will be generally on the basis

already provis. 7 .agraed »rth the Boards of the companies for application

to a merged company, and w4-1! bo designed to afford consumers safeguards on

matters of concern t* thuta, in particular, on tariffs, while at the same tin*

lowing tho man.igemont very largely under private control and giving adequate

incentives to officiant operation by wav of a reasonable return to share-

holdors' and furthermore to •wasv.ro ■'Jie provj sion of adequate capital funds

Tho legislation will also deal with a number of tho moro minor

natters arising from the Report of tho Commission. It is not the intention

Govomjuont will now proceed to prepare draft legislation for

In the light of this decision; Government has further decided

after consultation with tho Boards of tho companies, to relax tho restraint

MONG KONG GOVERNMENT - - .

NFORMATION SERVICES

DAILY INFO|(mATION BULLETIN . ~

Sunday, November 24, 1963

CONTROL OU CHARGES, DIVIDEKDS OF ELECTRICITY SUPPLY COMPAHITS

In December 1959. the Electricity Supply Companies Comission recotmmnded that the two electricity undertakings, as holders of de fgcto •monopolies of an essential public service, be compulsorily acquired in order to bring to an end the ;cneral conflict of interest between shareholders and the ng public and, in particular, the practice of the companies

whereby capital investment has been financed preponderantly fro* moneys paid by the consumer but this investment has not inured to the benefit of tho consumer, as opposed to the shareholder, to the extent appropriate in a situation of monopoly.

Government postponed consideration of the Commission’s recummjnri■tions pending the submission by the two companies of alternative proposals. These were received in October I960 and were rejected bv Government in January 1961 as fallIng to meet the Commission's criticisms.

In May 1962, Goverment and tho Boards of tho tw companies reached provisional agreement in principle on terms for merger of tho companies and for control of charges and dividends.

At an extraordinary general meeting in June 1962, views expressed by certain shareholders of the China Light and Power Company Limited in opposition to the terras of merger provisionally agreed by their Board showed that it was unlikely that the scheme would receive sufficient support to secure acceptance if formally pit to shareholders.

Tojtotroduco

In Decrnber 1962, the

In DecrHber 1962, the Board of the Hong long Electric Company Limited rejected proposals, which were acceptable to the Chin* Light and

2

215

Power Company Liaitod, for an independent re-assessment of terms of merger.

In consequence of these events Government has reached tho conclusion that it it not possible, considering tho present situation and

I the future prospects of each company, to devise toms of merger at this time which would be acceptable to both.

Government ha* now decided therefore to put aside tho question of merger for tho tine being and to introduce legislation as soon as possible designed to impose a control on the charges and dividends of each company separately, and to sake in return a grant of franchise rights, including certain statutory rights to place and maintain cables and other installations in public roads and elsewhere which, unlike other similar public utility companies, they do not hold at present and which wo essential to their continuing operation.

It is tho intention that control will be generally on tho basis already provisionally agreed with the Boards of the companies for application to a merged company, and will bo designod to afford consumers safeguards on matters of concern to them, in particular, on tariffs, while at the same time leaving tho managemont very largely under private control and giving adequate incentives to efficient operation by way of a reasonable return to shareholders* and furthermore to ensure tho provision of adequate capital funds to finance further expansion.

ainoy ^12.

The legislation will also deal with a number of the more minor matters arising from the Report of the Commission. It is not the intention to charge a royalty.

Government will now proceed to prepare draft legislation for introduction to Legislative Council in due courso.

In the light of thia decision, Guomment has further decided, after consultation with tho Boards of the companies, to relax the restraint

/on increases.....

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5

£

on increases in dividends enjoined on the directors of the companies after the publication of the Comb! s sion’s report in I960, to the extent of an increase in respect of 1963 to 11.80 per share in the case of the Hong Kong Siectrie Company Limited and $1.35 per share in the case of the China Light and Power Company Limited.

This is without prejudice to tho maximum rates of dividend which each company nay bo permitted to pay in future years under tho proposed statutory control.


CtOWNCOPYRKiHT • MH TV HE


349 < \


CAP. It3] gkcfncity Supply._______________________

!, i r«i<i (c) the protection of telegraph cables, telephone line*.

or lines operated by any department of the Government or by the naval, military or air force authorities or by any person or body of persons authorized by the Government to maintain a telegraphic service.

pm. fot A It shall be lawful for the Governor in Council to uTcSXfl grant exemption from any regulations made (or securing the XXSL safety of the public under this Ordinance to any company which proves to the satisfaction of the Governor tn Council that the conditions under which it generate* or supplier electricity are such as not to endanger in any way the safety of the public.

“ -— g. Any regulation under this Ordinance may impose

penalties for uffeners against the same not exceeding five hundred dollars for each offence, with or without penalties for continuing offences not exceeding for any continuing off eno <me hundred dollar* for every day during which the offence continues. All such penalties may be recovered summarily.

ttWMiWtrir ~

350

on increases in dividends enjoined on the directors of the companies after the publication of the CoTwdssion^s report in I960, to tho extent of an^ increase in respect of 1963 to $1.80 per share in the cuo of the Hong long Electric Company Limited and $1.35 por share in the case of the China Light

and Power Compart' Limited.

This is without prejudice to tho maximum rates of dividend which each company nay be permitted to pr* in future years under tho proposed