China Light & Power's project strategyR.W. Brooks. C.Eng., M.I.E.E.. M.H.K.I.E., M.I.PIantE.

Indexing terms: Power transmission and distribution, Transmission and distribution plant, Engineering adminis-tration and management

Abstract: A summary of the China Light & Power Company's background, operation up to 1975 and develop-ments since 1975 is given, covering territory, load growth, generation, transmission, distribution, intercon-nection and control. Then follows a discussion on the company's principles of project strategy applied to allprojects. This is followed by a Section on how these are applied to the Castle Peak B project, dealing withalternative methods of contracting, assessment and placement of risks, plant selection, price evaluation andproject management. The policies are then summarised and conclusions are drawn concerning their success.

1 Introduction

The history and the future of the China Light & PowerCompany are inseparable from those of the territory ofHong Kong. As the company has grown in the vigorouscommercial environment that Hong Kong enjoys, its struc-ture and management philosophies have changed. Thispaper briefly reviews this evolution and then sets outChina Light & Power's objectives when undertaking largecapital projects, such as Castle Peak B Power Station andthe 400 kV transmission system, outlining some of the stra-tegies adopted to meet these objectives.

2 Summary of China Light and Power's operations

2.1 Area of supplyThe territory of Hong Kong comprises of three sections:the island of Hong Kong, Kowloon Peninsula and the areabetween Kowloon and the border with the People'sRepublic of China, plus some 250 outlying islands, collec-tively referred to as the New Territories (NT) (see Fig. 1).

loadcentres

• CLPsupply area

New TerritoriesTsuenWan

Kowloon

Fig. 1tories

Existing and future load centres in Kowloon and the New Terri-

There are two power companies; Hong Kong Electric(HEC) which supplies Hong Kong and Lama islands andChina Light & Power (CLP) which supplies Kowloon andthe New Territories. CLP's area of supply covers some900 km2 (90% of the territory's total area), the populationof which is approximately 4.5 million (80% of the totalHong Kong population). In 1980, the CLP system wasinterconnected to the Guandong Power Company'ssystem, to which approximately 1 million units per day are

Paper 333OC, first read before IEE Power Division Professional Group P10, 18thMay 1983The author is with China Light & Power Company Limited, Argyle Street,Kowloon, Hong Kong

now exported. In 1981, the first interconnection with HECwas completed, thereby increasing system security andallowing a sharing of spinning reserve capacity.

Historically, the territory of Hong Kong was establishedas a trading port and, while expanding in this role, it hasalso developed as a major commercial/financial centre.The economy now has its base in export-orientated lightmanufacturing (textiles, toys, electronics).

In recent years, the New Territories have become themain area of economic and social development, and thePeople's Republic of China has created the ShenzhenSpecial Economic Zone just north of the border. Economicdevelopment of the territory has been based on main-taining a competitive position internationally, there beingno Government subsidies or trade barriers. The continuedprovision of a reliable and economic electricity supply isan essential requirement for success.

2.2 Scheme of controlCLP is an investor-owned utility responsible for the gener-ation, transmission and distribution of electricity in itssupply area and operating under a Government scheme ofcontrol. The investment programme has to be carefullygeared to the load growth, to ensure that both security ofsupply and profitability are maintained. Tariffs are strictlycontrolled by Government and the Company's activitiesare subject to close public scrutiny. Electricity chargescomprise a basic tariff and a fuel clause. Under the fuelclause, variations in the costs of oil and coal are passeddirectly to the consumer.

2.3 Consumers/salesTable 1 shows the Company's expansion between 1911and 1980, in terms of installed capacity, maximumdemand, units sold and number of consumers.

Table 1 : CLP's expansion in the period 1911-1980

Financial Installed Maximum Unit Thousandsyear capacity demand sold of consumers

MW MW GWh19111920193019401950196019701980

?

2.0211.5032.0050.50

183.00870.00

2416.00

?1.065.45

13.8037.20

145.00709.00

1980.00

?3.50

15.0051.00

145.00680.00

3154.008009.00

0.502.90

15.0031.0040.00

154.00531.00889.00

The number of consumers passed the 1 million mark in1982, and the annual consumption per capita is approx-imately 2200 units. The present installed capacity is3356 MW and the maximum demand this year is expected

222 IEE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984

to be 2475 MW. Growth in demand over the past 10 yearshas averaged 10.0% p.a., and for unit sales it has been8.9%. For the next decade, maximum demand is forecastto increase by 8.4% p.a. and sales by 7.4% p.a.

The system load varies considerably both on a day tonight and a summer to winter basis. The peak demandoccurs in the summer, when the air-conditioning load ismaximum, and the minimum demand at Chinese NewYear. The night-time load is less than half the day time.Such extremes in demand place onerous requirements onthe plant and operators (e.g. two shifting of generatingplant) and necessitate careful planning of the generatingand transmission systems to provide the required flex-ibility.

2.4 Po wer stationsThere are three power station sites supplying power to theCLP system. The oldest of these is Hok Un, which wasacquired in 1919. A variety of plant has been located onthis site and currently the installed capacity of 853 MWcomprises 3 x 30 MW and 8 x 60 MW steam units, plus283 MW of industrial gas turbines, recently installed. Thestation has served the Company well over' the years and isa credit to the Station Manager. The steam units are des-tined for a well earned retirement in the second half of thisdecade, and the gas turbines will be relocated to allow thesite, in central Kowloon, to be redeveloped for other pur-poses.

The Tsing Yi site was developed between 1966 and1977, and now houses six 120 MW and four 200 MW oil-fired units, together with one 42 MW gas turbine. Tsing Yiformed the basis of the Company's development throughthe 1970s, and its operational performance has been stead-ily improved.

All generation development since 1981 has been centredat Castle Peak, where four 60 MW gas turbines plus2 x 350 MW coal/oil-fired units are now in service.

All generating plant installed since 1964 is owned 60%by Esso and 40% by CLP; the latter being responsible forthe management of the joint assets.

2.5 Transmission and distributionIn common with all utilities which have been supplyingelectricity since the beginning of the century, voltage levelsfor transmission, distribution and consumption have beenchanged and rationalised many times by CLP.

By the late 1960s the bulk transmission system wasbased on 132 kV, with subtransmission at 66 kV and33 kV, the distribution voltage being standardised at11 kV. The design of the transmission and distributionsystem, and in particular the substations, has to take parti-cular account of the value of land/space in the territory.This resulted in CLP being one of the earliest companiesin the world to adopt SF6 metalclad switchgear; the firstsuch 132 kV switchgear being installed in 1974.

Since 1979, CLP has commissioned 22 primary sub-stations based on a standardised electrical design employ-ing three 35 MVA 132/11 kV transformers. Consumersubstation design has also been standardised. Typicallythese would be housed in a civil enclosure provided by theproperty developer within a multistorey block, and com-prise 2 x 1500 kVA 11 kV/345 V ON AN transformers, afour bank single busbar, bulk oil (and, more recently,vacuum) switchgear and an air-insulated LV distributionboard. In each of the three years since 1979 over 300 suchsubstations have been installed, i.e. more than one perworking day. This compares with an average of 150 in the

early 1970s, and there are now over 3500 consumer sub-stations in the CLP system.

Since March 1982, bulk transmission for Castle Peakpower station has been via the 400 kV transmissionnetwork, which is discussed more fully below.

In many cases, land utilisation at substation sites hasbeen maximised by including additional facilities in thebuildings, such as area and district offices, staff quartersetc. An example of this is the Tsim Sha Tsui substation;occupying a prime site, and senior staff quarters have beenbuilt above the station (see Fig. 2).

2.6 System controlIn 1969, a centralised power system control was estab-lished in a building above the 132 kV substation at KwaiChung. The computer-based system control and dataacquisition (SCADA) system covers all power stations,substations down to 33 kV and selected 11 kV circuitbreakers. The system permits remote control of powersystem plant, including circuit breaker and isolator oper-ation and onload transformer tap changing.

In 1978, automatic generation control (AGC) was intro-duced to all generators at the power stations and this hasbeen extended to cover the new gas turbines and the CastlePeak 350 MW units. All units are now loaded remotely,based on an economic load despatch programme.

The system is based on a microwave telecommunica-tions network which was engineered and installed by CLP.

A system simulator has also been developed by CLP fordesign and training purposes, on which all combinations ofgeneration, transmission and distribution faults can bemodelled.

3 Developments since 1975

3.1 BackgroundThe preceding Section gives a general picture of CLP andits operations. The more recent major developments arenow covered in greater detail.

By the early 1970s Tsing Yi B Power Station (4 x200 MW scheduled for commissioning between 1973 and1977) and the associated transmission and distributionsystems had been committed. All generation on the systemwas oil based. The oil crisis of 1973 and subsequent worldrecession led to a stagnation in load growth over the mid-1970s and the existing commitments were therefore seen asadequate to cover foreseeable expansion. Given the rela-tively low level of investment, project work was under-taken by small offshoot sections of the operationsdepartments. There was no formal integrated planning ofthis work.

In 1975, signs of renewed, strong long-term growth wererecognised by the CLP Board. The Company's seniormanagement was reorganised and strengthened. Theimmediate priority was to improve the Company's oper-ating performance, particularly the performance of TsingYi Power Station, but the need for a long-term majorcapital expansion programme was also quickly recognised.As a result, a more professional planning department wasset up to do load forecasting, tariff studies, generation andtransmission forward planning. In addition, a separateprojects organisation was established to execute the invest-ment programme.

3.2 PlanningIn late 1976 the first formalised development plans wereproduced. These are now reviewed and updated annually.

IEE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984 223

switchgear room(113 kV switch-room behind)

raf t foundation

basement pumproom

2x300MVA

cable 'trench

yard

link 132 kV Tai Won

Portland St.66kV3 x 3 5 v A

, y~\—QD Holt's Wharf

H c D

2x35 MVAChi Wo St.

C \—t+%,J.—QQ Harbour City

&82x35MVAMody Road

Fig. 2 Tsim Sha Tsui Substation and electrical schematic

224 IEE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984

The basic elements of the plan have remained, but thephasing/sizing of certain aspects have been revised to gearinvestment with growth.

The basis for planning is load forecasting. A number ofapproaches to forecasting are adopted including detailedarea-by-area, industry-by-industry breakdowns, based onforecasts from Government and private developers, fromwhich, not only the minimum and maximum generationestimates are derived, but also the anticipated load anddistribution profiles. In conjunction with this, tariff struc-ture studies have been carried out to determine how thepricing policy can best optimise the load profiles, whichare one of the main factors in determining the sizing ofgenerating units. Fig. 3 shows the load profiles for the days

3 0 0 0 -

2 500-

2 0 0 0 -

500

1000-

500 -

0 1 2 3 4 5 6 7 8 9 1011121314 15 1617 181920 212223 24time, h

Fig. 3 Load profiles for days of maximum and minimum demands

of maximum and minimum demand in 1982/83 (actual)and 1986/87 (forecast). These years correspond, respec-tively, to the commissioning of the first 350 MW and660 MW units. It was evident, by 1977, that recovery fromthe down-turn in electricity demand had already startedand the peak maximum demand was returning to the long-term growth curve. Fig. 4 shows the maximum demandcurve through to 1990. It can be seen that the actualmaximum demand (shown by crosses) dropped below thelong-term growth curve in the mid 1970s but had rebound-ed by the end of the decade.

Computer-based-system fault-level studies are under-taken as part of the transmission and distribution plan-ning. The products of the total exercise are generation,transmission and distribution development plans coveringa 10 year period, with the first 3 years firm. A computer-based financial model of the Company's operations hasbeen established and the plans are run through this on aniterative basis to produce an overall strategy matchinginvestment, security of supply, profitability and tariff.

The plans produced in late 1976 identified the need for amajor capital expansion programme. In addition to thealready expanding routine project work involving primary

substations, consumer substations, offices, staff quartersetc., the following would be required:

3265

Summer Peak /

-

-

\

1986

II

1,Jj

/

fi

\\! \2280 \

f/ Chinese

"^'20~

s*

* Summer Peak V

1300 \

New Year 1987 / \

Chinese New Year 1983

4000r

3000

2000

1000

. /

/

+ maximum demand

.+*

1960 1965 1970 1975 1980 1985 1990

financial year

Fig. 4 Maximum demand growth

(a) Gas turbines: To avoid the predicted shortfall in gen-eration before any steam-based plant could be commis-sioned, 250 MW of gas turbines were to be in service bymid-1980 at Hok Un; as this was the only location avail-able with adequate transmission facilities. A further250 MW of gas turbines were required for service by mid-1981.

(b) 4 x 350 MW coal/oil-fired units: For commissioningin 1982, 83, 84 and 85.

(c) Interconnection with HEC: 2 x 120 MVA linkrequired by 1981 to permit a sharing of reserve capacitiesbetween the companies, thereby avoiding the need for aneven larger gas turbine programme and the full 720 MVAcapacity by 1987 to facilitate the introduction of largergenerating units to the system, i.e. by increasing net systemminimum demand.

(d) 400 kV bulk transmission system: To overlay theexisting 132 kV and 66 kV network, providing secureoutlets from the power stations to bulk transmission sub-stations at various major load centres. An 1800 MVAdouble-circuit ring main around the New Territories wasproposed, bulk supplies to Kowloon being tapped off thering and brought to the urban areas via 4 x 400 kV cablecircuits of approximately 700 MVA each. The decision toadopt 400 kV, rather than the existing 132 kV was basedon fault level and system stability considerations. Theinstallation of the ring main was planned on a phasedbasis. The first section was required to be operational at132 kV to serve the gas turbines being commissioned in1981. The system was to be extended and upgraded to400 kV by the time the first 350 MW unit synchronised,with overall completion of the double-circuit ring sched-uled in phases through to 1986. It was recognised that thephased programme would result in reduced systemsecurity until the ring was completed. The risks wereevaluated as acceptable, the phasing being necessary tolimit capital expenditure and to ensure profitability duringthe early 1980s, and also to minimise the tariff increasesnecessary to pay for this capital expansion.

(e) 4 x 500/700 MW coal/oil-fired station: For commis-sioning in the latter half of the 1980s. (The requirements

IEE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984 225

for this station have subsequently been refined to definethe Castle Peak 'B' project as a 4 x 660 MW installation,the first unit scheduled for service in 1986.)

(/) New system control centre: This is required to beoperational by 1985 as, by this stage, the existing facilitiesat Kwai Chung would have reached saturation.

3.3 Progress to date

3.3.1 Gas turbines: The gas turbine project was coveredby three separate main plant orders. In mid-1978 a con-tract was negotiated with GEC Gas Turbines Ltd. for thesupply of two 56 MW-type EM610B units with an associ-ated financing package on the same terms as provided forCastle Peak A (see Section 3.3.2). This contract was nego-tiated to secure an order as quickly as possible, but, inparallel, CLP issued a specification for international ten-dering. Subsequently, an order was placed on 15th January1979 with Brown Boveri (BB), Mannheim, for two type13D, 76 MW gas turbines. All four units were installed atthe Hok Un Power Station site, the site clearance workstarted in October 1978 and involved the demolition andreprovisioning of an existing workshop and fuel store. Theproject also involved the construction of a tank farm, fireprotection systems and the installation of transformers andswitchgear.

The overall project management and engineering wereundertaken by CLP inhouse, including civil works design,contracting and site supervision, and the plant contractswere placed on an FOB basis, with installation and com-missioning being undertaken by CLP. The first machine(GEC) was synchronised on the 24th August 1979 and thelast of the four machines (BB) reached full load on the 19thJuly 1980.

Having established two suppliers whose products andoverall performance had been closely assessed andaccepted, the subsequent order for the units to be installedat Castle Peak for service in 1981 was negotiated on acompetitive basis between GEC and Brown Boveri. In theevent, the order was secured by GEC for two EM610C60 MW units, with an option for a further two units. Thecontract was placed in July 1979 and the option confirmedlater the same year, following a detailed analysis of thesummer peak load growth to confirm the demand projec-tions to 1981. The four units were commissioned between14th April and 21st May 1981.

All three phases of the gas turbine project were com-pleted on time and within budget.

3.3.2 Castle Peak A Power Station: In early 1977 a strat-egy had to be developed for ensuring reliable generationfrom the first dual-fired 350 MW unit in 1982, taking intoaccount that the site had not been confirmed by the HongKong Government. It was necessary to reduce the normaltime required for precontract negotiations and the sub-sequent design, manufacturing, erection and commis-sioning phases. These factors suggested the procurement ofa well proven plant, together with financing, by singletender action. As arrangements had to be concludedrapidly negotiations for a package offer commenced withthe UK Government's Department of Industry.

These negotiations resulted in a 'letter of intent' beinggiven to GEC in December 1977 covering the FOB supplyof a two unit power station package, with an option for afurther two units. Babcock Power Limited was the prin-cipal subcontractor for the boilers, and L.G. Mouchel &Partners were appointed the civil design consultant.

The order was supported by the UK Government's

Export Credit Guarantee Department. Loan facilities for100% of the value of UK goods and services were co-ordinated by the City of London Merchant Bankers J.Henry Schroder Wagg. Also included in the package weresupport services from the Central Electricity GeneratingBoard (CEGB) via British Electricity International (BEI),including the provision, as required by CLP, of personnelfor project management, design, manufacturing qualitycontrol and commissioning.

As with the gas turbines, the order for the third andfourth units was subsequently confirmed following theobserved, sustained, system load growth over 1978/79.

The Hong Kong Government decided to change thepower station site to Castle Peak shortly after the 'letter ofintent' had been placed. Access for civil works was grantedin July 1978 and, despite the massive scale of the works,which included the removal of 10 million m3 of rock fromthe adjacent mountain and extensive reclamation from thesea to form the 63 hectare site, the first unit was steamedon 29th February 1982; 3 years, 8 months and 12 daysafter civil works commenced. The second unit A2 receivedsteam ahead of programme on 17th February 1983 andachieved full load on coal on 1st March 1983 (the prog-rammed date for steam-to-set). Since the start of com-mercial operation, Al's availability has been 94% and,despite an average sea water temperature of 25°C, theaverage sent-out thermal efficiency has been 35.9%. Thesavings in costs to the consumers, resulting from this coal-based generation replacing oil-based generation from olderplant, is in the order of HKS1.5 million/unit day.

The final two 350 MW units are being erected to anadvanced programme which will result in their commis-sioning on 1st January and 1st December 1984, respec-tively.

The project has run to or ahead of the original prog-ramme and is within budget.

3.3.3 Interconnection with HEC: The interconnectionwas carried out by laying 6 x 132 kV cables in three pairsacross Hong Kong Harbour. Each pair was laid at 70 mspacings except at the landing points. Hong Kong'sharbour is one of the busiest in the world, and to preventdamage due to dragging anchors, particularly in typhoons,the cables are buried at a minimum depth of 3.5 m. Thecapacity of the link is currently 2 x 240 MVA, but thethird pair of circuits will be commissioned in 1987 to givea final rating of 720 MVA. Installation work commencedin early 1980, and the first phase was commissioned onprogramme in April 1981.

3.3.4 400 kV bulk transmission system: For similarreasons as applied for Castle Peak A, the contract for theEHV system was negotiated on a package basis withfinancing, the order being placed with Balfour Beatty inMay 1978. The scope of work covered both supply andinstallation, CLP lacking the necessary experience andresources to undertake the overhead line constructioninhouse. The 400 kV and 132 kV SF6 switchgear contractwas placed separately with Mitsubishi EngineeringCompany (Melco), with Balfour Beatty havingresponsibility for interface engineering.

Stage 1A of the EHV project comprised 18 km of1800 MVA double-circuit overhead line from Castle Peakto Tai Lam Chung. The line was commissioned at 132 kVslightly ahead of programme in March 1981, providing anoutlet for the Castle Peak Gas Turbines.

Stage IB called for completion of the following by April1982:

226 1EE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984

(a) a 21 km extension of the line from Tai Lam Chungto a 400/132 kV substation to be built at Tsz Wan Shan

Fig. 5 400 kV transmission system

(b) installation at Tsz Wan Shan of a 400 kV 4 x 1-1/2switch breaker scheme, 3 x 240 MVA 400/132 kV trans-formers and 13 panels of 132 kV switchgear

(c) installation of 2 x 700 MVA 7 km 400 kV cable cir-cuits through urban Kowloon to the Tai Wan Substation

(d) completion of the Tai Wan Substation including3x1-1/2 switch bays at 400 kV, 15 panels of 132 kVswitchgear, 2 x 240 MVA transformer and 2 x 400/66 kV180 MVA transformers, plus the 2 x 240 MVA 400/132 kV transformer feeders for the cross harbour inter-connector

(e) A 7 km portion of 400 kV 1800 MVA double circuitoverhead line between Shatin and Tai Po which was to beoperated for several years at 132 kV.

The civil works at Tsz Wan Shan, as well as switchgearinstallation at both Tsz Wan Shan and Tai Wan, were theresponsibility of Melco. The civil design and contractsupervision of the Tai Wan Substation was carried out byCLP inhouse.

Integration of the new 400 kV system into the existing132 kV system required extensive outages, detailed plan-ning and the maximum co-operation of all parties con-cerned. All aspects of the project were completed slightlyahead of programme.

Stages 2 and 3 of the EHV system, which will completethe 95 km double-circuit overhead line, establish a furtherfour 400/132 kV substations at Tai Po, Yuen Long, LaiChi Kok and Lei Muk Shue as well as extending facilitiesat Tsz Wan Shan and Tai Wan, are currently on prog-ramme for completion by 1986.

At the outset of the project, it was recognised that CLPlacked sufficient inhouse resources with 400 kV experienceto execute the project. A special project team was thereforeset up within CLP comprising senior engineers both fromBEI and CLP. As CLP's inhouse expertise has developedand individual BEI engineers have completed their assign-ment contracts, the level of BEI involvement has beenreduced and the 400 kV team has now been merged withCLP's existing 132 kV organisations. Similarly, based onexperience gained, it is now intended that all 400 kVswitchgear erection and substation civil design and super-vision will be carried out inhouse. It is not, however,intended to build up CLP's inhouse expertise for 400 kVoverhead line design and construction owing to the infre-quent requirements.

3.3.5 System control centre: A project team has been setup within CLP responsible for the new system controlcentre. All civil works design and site supervision will beundertaken inhouse and the site, located in a semiruralarea near Tai Po, is also to be developed to provide luxurystaff quarters and a management training centre.

A functional specification for the new SCADA systemwas prepared with some assistance from a consultant andfollowing a world survey of state-of-the-art practice. As aprequalifying exercise, this specification was issued toseven potential tenderers for technical submissions. Fromthese, three tenderers were selected and issued with a fulltechnical/commercial specification. The order was placedwith the lowest bidder, Harris Corporation, Florida, whocould supply proven hardware and software. CLP engi-neers are now working full time in Harris's works monitor-ing hardward and software progress, and further engineersare attending shorter-term training courses in the USA todevelop an inhouse hardware and software maintenancecapability.

When commissioned in 1984 the system will incorporatethe following features:

(a) advanced automatic generation control and eco-nomic load despatching

(b) sequence of events recording, time tagged, for accu-rate post fault analysis

(c) system state estimation under any conditions ofoutage or generation and prediction of contingentoccurrences for system security analysis

(d) broadcast command of global instructions such asselective load shedding or voltage reduction.

3.3.6 Transmission projects: All design and constructionat 132 kV and below is done inhouse and, in addition toproviding preliminary information including budgets, onalternative designs to the planning group, there are nor-mally around 100 transmission projects in hand at anygiven time. The number of projects has increased substan-tially since 1976, when the Hong Kong Governmentannounced their intention to direct future growth awayfrom the already overcrowded areas of Hong Kong Islandand urban Kowloon into the more sparsely populatedNew Territories. It was proposed that six New Towns becreated at Tai Po, Yuen Long, Shatin, Fanling, Tuen Munand Tsuen Wan. All of these new towns are in CLP's areaof supply and most are in sectors of the territory whichwere fed by the double-circuit 40 MVA 66 kV NT ring.Rapid development of the transmission system has there-fore been required to cover both the growth and relocationof demand.

In a typical year, some 25 panels of 132 kV switchgear(normally SF6), 20 transformers, of various sizes from 80 to35 MVA, 150 panels of 11 kV switchgear and 70 km ofoil-filled 132 kV cable are installed.

In January 1979, negotiations with the GuangdongPower Co. (GPC) across the border in mainland Chinaresulted in an agreement for CLP to provide an infeed tothem as soon as possible.

This was one of the earliest major engineering venturesinvolving a Hong Kong Company and China, and gener-ated considerable local and overseas interest. As a conse-quence of this, there were a number of problems, involvingthe movement of men and materials across the border andthe integration of two different systems, which had to beovercome. The installation involved a 12 km 50 MVA66 kV overhead line from CLP's Fanling substation to atemporary substation in Shum Chun. The line fed via anOCB on to a transformer which had been converted from

IEE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984 227

80 MVA 132/66 kV to 110/66 kV, thence to the local 110kV transmission system.

The system was designed and installed in less than 3months and went on load on 29th March 1979. The com-pletion of the project in such a short time was a tribute tothe staff of both companies, and to the co-operation andassistance provided by the Hong Kong and Chinese gov-ernments. The initial 66 kV 50 MVA single circuit infeedwas supplemented in 1980 by a 100 MVA 132 kV infeed,run initially at 66 kV. This latter line was installed to facili-tate increased sales of electricity to China in 1983, 84 and85.

Advantage has been taken of the current depression inworld market prices for electrical equipment. Bulk pur-chase orders have been placed covering periods up to 10years which, in addition to low base prices, have advanta-geously low and/or limited maximum inflation rates. Calloff requirements and other contract conditions have beennegotiated to allow the orders to be firmed up on a prog-ramme basis as the development plans are confirmed.Items covered by this policy include 400 kV switchgear,132 kV switchgear, 11 kV switchgear, transformers andprotection equipment.

4 Principles of project strategy

4.1 ObjectiveClassically, a successful project is one completed to budgetand programme, while providing an end product withsatisfactory long-term performance. CLP continues todevelop its organisation, methods and policies to maximisethe success of its enterprise.

Due regard has been taken of the lessons learned fromthe Tsing Yi Power Station project and previous transmis-sion and distribution work. Subsequently, the adoptedstrategies have been reviewed and enhanced followingexperience gained in the projects undertaken to date.

Each project is individual and the strategy followed issuitably tailored. The following Subsections, however,detail some of the key factors that feature in CLP's choiceof project strategy.

4.2 lnhouse capabilityCoincident with the identification of the need for a majorcapital expansion programme was the tremendous infla-tion the world was facing following the oil crisis of theearly 1970s. CLP was faced with a multi-billion-dollarprogramme during the 1980s. From a steady expenditurerate not exceeding $275 million in any year up to 1977, thefigure has increased to an annual peak in the mid-1980s ofmore than sixteen times that amount. It is interesting tonote approximately 40% of the investment represented byFig. 6 is associated with routine projects, i.e. work otherthan Castle Peak or the EHV system. An underlying factorin deciding the strategy to be followed for project execu-tion is the belief that CLP should take as much directresponsibility as possible for the expenditure; and thisleads to heavy inhouse involvement in the project execu-tion.

In the Tsing Yi project, CLP undertook civil design andthe construction via an inhouse company. Plant erectionand commissioning was also carried out by CLP. Thisinhouse involvement proved successful in controlling costsand ensuring completion to programme. On completion ofthe projects, the erection staff were redeployed into main-tenance, strengthening that aspect of the organisation and,at the same time, reducing the need for contractors duringannual overhaul. However, in the civil construction area,

there was no continuity of work and the workforce had tobe laid off. CLP did not take a very active role in plant

40000

I 30 000

20000

10 000

1970 71 72 73 1U 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90financial year

Fig. 6 Group capital expenditure

engineering, the plant specification being in broad termsonly. This resulted in certain aspects of the plant notmeeting CLP's (unspecified) operational needs and alimited understanding of the equipment. Both these factorswere contributory to the somewhat disappointing earlyperformance of Tsing Yi. The conclusion drawn from theTsing Yi experience was that inhouse involvement pro-duces success, but the areas of involvement must be con-sidered carefully.

Subsequently experience has reinforced the view thatthe inhouse policy is correct. CLP now undertakes themajority of its own project engineering work (design andspecification etc.), project management, plant erection andcommissioning. This results in the plant being accuratelyspecified to meet operational requirements and the appre-ciation of the plant gained through the design, erectionand commissioning phases being retained in the company,producing long-term operation and maintenance benefits.It leads to more direct control of costs and programme.Further, cost savings can result by the client acceptingresponsibility for risk areas which he is more competent tocontrol than the contractor. This point is discussed morefully later.

Clearly, an inhouse policy cannot be implemented over-night as suitable resources have first to be established.Interim use of outside expertise has therefore beenemployed, enabling CLP to pursue a policy of selectiverecruitment, for example:

In the case of Castle Peak, BEI provided fairly largenumbers of project management and commissioning staff.These were integrated with CLP's established erectionsection and small project engineering section to form theoverall team. CLP continued to recruit engineering staffsteadily, while training junior staff. Subsequently, an exclu-sively CLP engineering team was set up for the B stationproject, the CLP/BEI team continuing to cover the Astation. By mid-1982, the main B station contracts hadbeen let and the majority of basic engineering issuesresolved. The work load in the A station was diminishing,following the commissioning of the first unit. The A and Bteams were therefore integrated and the BEI involvementphased out as individual engineers completed their assign-ment contracts. Likewise in commissioning, CLP staff haveunderstudied the BEI engineers over the first two units andfor Units A3 and A4 are taking the lead role. The man-power service provided by BEI has thus proved most

228 IEE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984

Table 2: Distribution of engineering staff within the project organisation

Project engineeringsite staff

(excluding labour)Totals

Generation

51

131182

Transmission

69

83152

Civil works

93

35128

Total

213

249462

useful in covering an initial shortfall in resources, and intraining staff.

CLP undertake civil design and site supervision workfor all the routine transmission and distribution projects,staff quarters area, district and cash offices, substations etc.Such projects would now only be contracted out to consul-tants, architects or turnkey contractors on an exceptionalbasis, to cover periods of peak work load. The powerstation civil design and site supervision work, which is ofan intense and intermittent nature, is now placed with con-sultants.

The number of engineering staff within the projectorganisation currently is as shown in Table 2.

It is CLP's experience that even for those areas con-tracted out, Hong Kong must remain the centre of activityto ensure rapid and clear communications. To achieve this,the contractors and consultants employed on Castle Peakand the EHV network have all established offices in HongKong.

4.3 Pro ven plan t/established suppliersExamination of the cost diagram, Figs. 7 and 8, shows thatfor both power station and transmission projects the plant

YW$ plant l&SSl financing |$^$<l land/civil

fcffijfl project management p S l contingency

Fig. 7 EHV transmission system cost diagram

supply cost represents some 38% of the total. This percent-age understates the overriding importance of the plant,which must perform reliably over the life of the installationif the project is to be successful.

A fundamental CLP philosophy is the procurement ofproven plant. This not only ensures satisfactory long-termperformance but also leads to success in cost control andplanning, e.g. problems owing to late design changes, inac-curate or inadequate interface data, and, in manufacturing,erection and commissioning are minimised.

In pursuance of this policy, the inhouse engineeringresource has been progressively increased to the levelsshown in Section 4.2, to improve the capability for detailedassessment of suppliers' proposals and designs.

[fofrffi plant H H | financing [&><£j land/civil

fcj$g project management i H H contingency

Fig. 8 Castle Peak B Station cost diagram

Allied to this policy, CLP have progressed towards sel-ecting established suppliers for the majority of plant areas.While large engineering resources must be devoted to theassessment of a supplier's products at the initial stage, oncesatisfied of its suitability, track record etc. the subsequentlong-term bulk purchase enables the contractor to concen-trate on quality of manufacture and delivery performance,while CLP may proceed efficiently with interface engineer-ing, civil works etc. based on standardised plant details. Asmentioned in Section 3.3.6, such bulk purchases are basedon contract terms which allow orders to be firmed on aprogressive basis, as the development plans become firm.This policy applies not only to transmission and distribu-tion equipment, but also to generating plant, GEC's CastlePeak B order being an example; i.e. the four units rep-resent CLP's installation requirements through to 1990,with the timing of the final two units left flexible to accom-modate any changes in load growth. Both GEC and CLPdevoted their early design efforts to agreeing all plant/system details and are now, respectively, concentrating onmanufacture and civil works, which will largely be stan-dardised for the four units.

The term proven plant is intended to cover not only thedesign, but also the manufacturing processes and qualitycontrol. CLP have bitter experiences of proven and estab-lished products failing because in one area or another apreviously untried material, process or subcontractor wasemployed. Quality assurance is therefore considered ofparticular importance. For geographical and resource uti-lisation reasons CLP do not generally undertake QAwork, rather, inspection agents already established in thecountries of plant origin are appointed.

Finally in discussing plant, CLP pays great attention tothe architecture and finishes of its developments. If theplant installation looks good from the outset, it will bewell maintained and long-term performance benefits willresult. Tsing Yi power station is a good example of this,where the housekeeping now is of the highest standards.

IEE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984 229

4.4 ContractsIn the drafting and awarding of contracts particularemphasis is placed on the following:

(a) Ensuring clarity of technical and commercial condi-tions such that both parties fully appreciate their com-mitments.

(b) Making the contractors' risks, responsibilities andincentives compatible with CLP's objectives. Damages andterms of payment are geared to this. 'Standard forms' arenot employed and specialised conditions of contract havebeen developed.

CLP has endeavoured to develop good working relation-ships with its established suppliers and contractors. Con-frontation is avoided and emphasis is placed on team workto complete the task in hand, leaving any areas of disputefor settlement at a later date.

4.5 ControlsThe responsibility of projects is placed with engineers, theyare made accountable not only on technical matters, butalso in programme and cost terms. Any tendency to takethese responsibilities from the engineers, as the organis-ation and scale of work has expanded, has been resisted.

Notwithstanding the above, capital expenditure, at thescale in question, must be subject to stringent controls.Procedures have been set up to ensure commitment,expenditure and budget control, design change control andto monitor performance against programmes. Care hasbeen taken to ensure that the introduction of these con-trols does not stifle the engineers' initiative and sense ofresponsibility. At present, a new computer system is beinginstalled, with site and head office terminals, to furtherimprove these control procedures and to expand the plan-ning capability.

5 B Station project strategy

The B Station contract strategy is explained in the follow-ing as one example of how principles set out in Section 4have been implemented.

5.1 Alternative methods of approachAt the outset of the project a fundamental review of alter-native contract strategies was carried out. Three methodsof contracting were considered:

5.1.1 Turnkey: The Turnkey contract is a total package,the contractor (or a consortium or joint venture) takingover the site from the owner at the outset, executing thewhole of the civil, mechanical and electrical engineering,construction and commissioning through to commercialoperation, and handing the site and completed projectback to the owner at the end of the contract period. Inpractice, this total concept rarely applies, as there arevarying degrees of owner involvement through to commis-sioning, and the handing-over process is phased andcomplex, depending on the sophistication of the plant andthe technical competence of the owner.

The turnkey contractor usually includes a managementfee in his price, and large contingencies to cover the riskswhich may be encountered during the life of the project,particularly in the civil construction if there is a largeelement of risk attached to the site location. The owner, inturn, allows contingency margins in his cost estimate forthe project for the same reasons.

The advantage to the owner is that his risks and totalcosts can be defined at an early stage.

The turnkey concept is popular in developing countries,where little local expertise and few skills are available. Insuch circumstances, consultants may be retained to watchover the turnkey contractor and safeguard the owner'sinterests. The turnkey contract does have the advantage ofincreased government-supported export credit finance bymaximising goods and services from a particular country.

5.7.2 Multicontract: The basis of this approach is todivide the project into numerous parcels of work ofvarying size, each individually contracted. As many asthree hundred supply contracts could be involved. Theadvantages are in the competition achieved by contractingthe parcels direct with the specialist supplier,.and avoidingthe mark-up of an intermediary. The disadvantage is in thevolume of interface engineering, the extent to which detailengineering must be advanced before contracts can beplaced and the attendant need for prolongation of theproject programme.

Because of the substantial increase in precontract andpostcontract engineering in interface management betweencontracts and contractors and the many detailed specifi-cations and contracts to be placed, the demand on theutility's engineering resources is considerable.Responsibility for either or both project management andengineering and detail design may be contracted to con-sulting engineers.

Owing to uncertainty as to where and when the con-tracts will be placed, the. scope of export credit loanfinance is usually lowest for a multicontract strategy.

5.1.3 Island contract: In this approach the parcels ofwork are increased in size and reduced in number, effec:

tively being a compromise between the other twoapproaches. It reduces the utility's involvement in interfaceengineering and management, and hence resource require-ment and risks in this area. In addition, the number ofcontractors to be accommodated on an extremely con-gested site, such as Castle Peak, is much reduced. With thelarge parcels of work, loan financing becomes viable.

Typically, a power station project may be divided intothe following islands for contracting:PlantTurbine generator and ancillariesBoiler and ancillariesCoal handling plant400 kV switchgear132 kV switchgearStation electrical systemsBalance of mechanical plant

CivilPiling, foundations and roadsStructural steelworkSuperstructures and ancillary buildingsCW system intake, outfall and pump houseJetty worksChimneyFinishing works

5.2 Project cost centres and risk areasTo evaluate the alternative approaches, the risk areas ineach cost centre were examined to determine where theresponsibility for control of those risks should be placed.

There are many ways to subdivide the cost of a project.Table 3 shows a broad percentage cost profile, excludingescalation and financing, used at the time of deciding onthe strategy for the B station.

230 IEE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984

Table 3: Division of project costs

Cost centre

CivilLand and site formationCivil construction

PlantManufactureFreight and insuranceErection and commissioning

Project managementCivil design and supervisionProject controlOperator training

Project contingency

Total

%

225

403.5

11.5

' I11

100

Total %

27

55

7

11

100

Of the four cost centres, two main centres, civil andplant, are considered in detail; as project contingency islargely assigned to the civil and plant cost centres, andproject management is concerned with the management ofall three.

The risks associated with the main cost centres may beloosely categorised as offsite and onsite; and here onsite issupposed to mean anywhere other than the country ofplant manufacture. As the nature of risks for civil andplant are very different they are considered separately.

5.2.1 Civil risk: The estimates showed that 27% of theproject base cost was in the civil cost centre (N.B. civildesign is included in project management). The civil costcentre is subject almost entirely to onsite risk, e.g.

(a) ground conditions at the site(b) costs of civil materials(c) availability and productivity of labour(d) local inflation(e) local availability of civil engineering plant(/) performance of local contractors(g) access to site and on site(h) contractors working areas(0 storage0) transport of labour to site

An offsite organisation (i.e. plant contractor or consortiumemployed under a turnkey contract) would not be wellplaced to assess the onsite risk, and would therefore haveto include larger contingencies in its cost than an onsiteorganisation (i.e. owner or local contractors). If the owneraccepts the risk (i.e. by placing civil contracts directly), hecan potentially reduce his costs: first, by adopting moreaccurate contingencies and, secondly, as a result of savingsshould onsite conditions prove more favourable thananticipated.

5.2.2 Plant risk: In the case of plant, offsite risks include:(a) knowledge of extent of supply(b) factory productivity(c) management of subcontractors(d) quality control inhouse and with subcontractors(e) materials availability and procurement(/) overall capability to manage complex contracts(g) performance to time and cost(h) size of contract in relation to order book(0 inflation in the country of manufacture.

The risk associated with the first of these items can beminimised by an owner specification which clearly definesthe technical requirements, scope of supply, project man-

1EE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984

agement and contractual requirements. The quality of thespecification is of equal importance to the owner and thecontractor. The assessment of the remaining items isclearly best left to the contractor, assisted maybe in the lastitem by a government scheme, but the owner will havecarried out some prequalification assessment himself onlikely contractors.

The onsite risks with plant would include the following:(a) freight(b) insurance(c) local transportation (docks to site)(d) erection (local labour availability and productivity)(e) commissioning personnel and materials(/) site working areas and storage areas(g) logistics of plant movement to job site(h) reception of heavy loads(i) weather protection and delays due to bad weather.

Here, as with the civil cost centre, it is reasonable for theowner to accept the onsite risks (representing about 15%of the base project cost). The owner would then make thenecessary assessment and budget provision, and wouldaccrue the benefits resulting, should more favourable con-ditions be experienced than had been anticipated.

5.2.3 Summary of risk: In summary, therefore, the conclu-sion reached was that offsite risks fundamentally onlyapply to plant, and then only in part (i.e. manufacture),that part representing 40% of the base project estimate. Itwas further concluded that the assessment and manage-ment of this risk, in money terms, could best be made bythe plant contractor who should, therefore, be given theresponsibility for this risk. The remaining 15% of baseproject estimate within the plant cost centre (freight andinsurance, erection and commissioning) together with the27% within the civil cost centre are categorised as onsiterisks; and therefore the assessment should be made andrisk taken by the owner, to whom any savings wouldaccrue, should more favourable conditions be experiencedthan had been anticipated.

5.3 Approach selected by CL PHaving concluded that offsite risks apply, in the main, onlyto the design and manufacture of the plant, a turnkeyapproach for Castle Peak B Power Station was ruled out.It was CLP's opinion that for the 'B' Station the disadvan-tages of a multicontract approach far outweighed theadvantages, and so the island approach was selected.

This is the approach, in one form or another, which tra-ditionally has been adopted by CLP in power station con-struction, and which has been found to be entirelysatisfactory. The number of islands and, hence, the size ofislands hasr however, varied between projects.

On a multi-unit station, the operation of the plant isconsiderably improved if all units are identical. A mixtureof plant, in manufacturer, size, or characteristics can easilylead to confusion and expensive operator error at a time ofcrisis. By far the most successful stations are those withoutthis added complication. Because of restrictions imposedby the congested site, certain assumptions had alreadybeen made in the station layout, one of these being that allunits will be identical. As well as permitting the necessarymaximum degree of compaction of the plant layout, thebenefits of four identical units also allow optimum eco-nomic design of common services, such as cooling-watersystem, station auxiliary electrical system and stationmechanical services. The very compact layout requiresmajor turbine house foundation works for all four units to

231

be substantially complete before the first unit is put intoservice. Although not impossible, it would be extremelydifficult to adapt these foundations to accommodate plantof different manufacture. It was therefore decided to havefour identical units.

Having decided on the island approach, the two majorcost centres, civil and plant, were again considered toallow further decisions to be taken.

5.3.1 Civil contract strategy: A consideration in theoverall contract strategy for civil works was the extent towhich civil works were to be committed, i.e. for how manyunits. Since the Station was being considered as a twophase development, each phase containing two units, itwas possible to use a number of approaches for some sec-tions of the civil work. Clearly there are major sectionswhich provide a common service for all four units andmust be built in total during the first phase of develop-ment. In view, however, of the congested nature of the site,it was not considered desirable to carry out excavationworks in the vicinity of operating plant, and, as the deci-sion had already been taken to have identical plantthroughout, it was decided to commit the civil works forall four units at the same time.

Consideration was given to the type of civil contract tobe awarded, assessments being made of the merits of lumpsum, unit price, and reimbursable cost contracts.

Under a lump sum (LS) contract, the owner buys acomplete package of work for a fixed price, at the time ofthe contract award. This may be subject to escalation pay-ments controlled by contract price adjustment (CPA)clauses, but, nevertheless, is an all embracing price whichcontains any necessary margins or contingencies, whichthe contractor considers is prudent to include, to allow foruncertainties he may encounter during the life of theproject.

Under a reimbursable cost (RC) contract, the ownerbuys a complete package but reimburses the contractor formaterial and services at whatever they cost. The reimburs-able cost contract may also include a fixed fee to covermanagement costs.

Under a unit price (UP) contract, which lies between theLS and RC contracts, the owner buys a complete packageagainst a price schedule which is broken down into unitprices fixed at the time of contract award. In execution, thecontractor runs the job like an LS one to gain himself themaximum profit. As with a full lump sum contract, theowner has to maintain effective quality control. As withthe RC contract, the owner pays whatever the scope of thepackage costs.

The advantages and disadvantages to both owner andcontractor of all three methods are well known. All threecontracting methods can be and are used to varyingdegrees for the civil work on power station projects. Tradi-tionally, in the UK and Australia, the UP method is pre-dominantly used, with the LS contract where definition ofthe particular works in question is sufficiently advanced toallow. In the USA, the practice between LS and RC varies,some preferring the RC approach.

As the civil contracting industry in Hong Kong followsclosely the contracting practices adopted in the UK, andas the project programme required that civil contracts beplaced before the civil designs were advanced enough toallow LS contracts to be let, the UP method of contractingwas chosen for Castle Peak.

It is estimated that at least a further year of design timewould have been required to allow enquiries to be issuedfor LS contracts.

232

The next decision to be taken was the number of con-tracts (islands) to be let. This was relatively easy as the Astation breakdown, having been successful, was followed:

(a) foundation, piling and road(b) structural steelwork(c) superstructures and ancillary buildings(d) CW system(e) chimney(/) finishes (minor contract, maybe daywork under one

of the others).The tender list was kept as small as possible consistentwith ensuring competition, and each tenderer was selectedwith the capability to undertake more than one contract(except the chimney). This was done to take advantage ofkeen pricing which could result from common site estab-lishment, and to reduce, if possible, the number of contrac-tors on the very congested site. The five major contractshave now been placed, the first three successfully, tenderedby Kumagai Gumi, the CW system by Kier-Gammon, andthe Chimney by Tileman.

With so few civil contractors on the site, it has beenpossible to remove some of the programme floats put intothe separate contracts for contractor interface difficulties.This is expected to give earlier access for plant erectionthan originally planned.

5.3.2 Plant selection: In selecting the plant, three prin-cipal subjects had to be addressed: namely, the prog-ramme, the plant and the price.

(a) Programme: The requirement for Castle Peak B wasto have the first unit in full commercial operation by theSummer peak of 1986. With the contract to be awardedmid-1981, this presented a fairly tight programme for aunit of this size and the method of contracting is condi-tioned by this fact.

(b) Plant: The overriding considerations in selecting theplant were:

(i) proven track record for the main equipment (Thiswould include a demonstrable reliability, as shown by agood history of operating achievement, either separately orin combination, using fuel similar to that specified.)

(ii) auxiliary equipment with a similar proven history(iii) recently introduced materials, manufacturing

techniques or design changes to be minimal, and backedby evidence of research and development, to justify theirintroduction to an otherwise proven system

(iv) equipment maintainable without degrading avail-ability.

To demonstrate reliability and experience, it was felt aminimum of ten items of equipment of very close specifi-cation to that required for Castle Peak B should alreadybe in service.

The principal plant items for a power station are, ofcourse, the boiler and the turbine-generator set. A surveywas carried out of manufacturers who could satisfy the cri-teria laid down by CLP, and on the boiler side threemanufacturers were felt to prequalify, and on the turbineside five. It was soon apparent that the UK had manufac-turers well qualified to supply both boilers and turbinegenerators to the specification required. CLP had achievedsuccess on the A station with the manufacturers GEC andBabcock Power Limited. There is a very strong argument,frequently used, for not changing a winning team, andCastle Peak is no exception to this. It was recognised thatmany advantages were attached to staying with the samemanufacturers. Among these was operator familiarity withthe plant; although different in size, 350 MW and 660 MW

1EE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984

plant from the same manufacturer have many commonfeatures. Another immediate advantage was the confidenceand understanding which had built up over the yearsbetween CLP and the contractors. This had resulted insmooth working relationships and an advanced appre-ciation of the key problem areas by all parties, which itwas felt could lead to a shorter project programme.

(c) Price: Having identified potential suppliers for theplant, another important consideration was its price.Placing a contract after a competitive tender will give theowner the assurance that a reasonable contract price hasbeen achieved. However, not only is the preparation oftenders very expensive, but tender evaluation is often con-fused by comparison of plant of varying technology. Othermethods of achieving a mutually acceptable price as pos-sible.

For Castle Peak B station, a unique strategy was thereforedeveloped to give CLP the right plant at the right price tothe required programme.

The requirement was to obtain four identical units witha capacity of nominally 660 MW each. They were to becoal-fired with emergency oil-firing capability, and theyshould be commissioned one in each of the years 1986,1987, 1989 and 1990. A tender for four units would berequested with an option to advance, delay or cancel units3 and/or 4. The purpose of this was to secure financingcover for the whole station, and to give flexibility on thelast two units to match load growth in the latter part ofthe eighties.

The total scope was divided into sections or islands,each chosen to allow a specialist contractor to design,manufacture and supply all plant within the island up todiscrete terminal points, which dovetail with the next plantisland and also provide a clear cut civil engineering inter-face with the civil designers and contractors. The outcomewas six plant islands:

(i) turbine generator(ii) mechanical services

(iii) electrical services(iv) boiler(v) coal plant

(vi) 400 kV switchgear and cablesplus one project management island.

This latter island includes those services required byCLP, not possessed inhouse, which would be expensive toset up, and, having done so, because of the peaky nature ofthe requirement, would be difficult to provide continuingcareers for staff. These are civil design, E & M design,inspection and expediting, training, and specialist erectionand commissioning advisors.

User specifications for the seven islands were sent to theUK Government Department of Industry with an invita-tion to assemble an appropriate offer, including finance. Astrict time limit was set for submission of the offer and thenegotiations to follow, to allow CLP to go to internationaltender, if negotiations failed to reach a satisfactory conclu-sion.

The UK offer was received on the 31st January 1981and the UK team under the leadership of a Deputy Secre-tary of the UK Department of Industry arrived for nego-tiations on the 25th February.

GEC was proposed as the main plant contractor withBabcock Power Limited as the principal subcontractor.L.G. Mouchel & Partners (LGM) and British ElectricityInternational were put forward for civil design and engin-eering services, respectively. J. Henry Schroder Wagg wasput forward as agent for a consortium of merchant banks

to provide credit facilities backed by the UK GovernmentExport Credit Guarantee Department (ECGD).

During the tender period, preparations were made forthe negotiations. It was recognised that the cost of thetotal UK package could be broadly categorised as:

(a) base price for plant and services (1st January 1981)(b) escalation(c) finance charges

Clearly the first of these has a knock-on effect on the othertwo.

To test the cost competitiveness of the UK offer whenreceived, two consultants were appointed to assist. Electro-watt Engineering Services of Zurich, Switzerland, andGilbert Associates Incorporated of Pennsylvania, USA,were selected for this task, because of their particularexpertise in cost engineering and their possession of com-prehensive cost data banks. They were each given copies ofthe user specifications sent to the UK Government andasked to comment on the completeness of the specifi-cations, and to prepare cost estimates in the same detail asrequired of the contractors; that is, by plant island, sub-sections and individual items. They were also requested toprepare cost estimates for the management servicesrequired. The consultants initially worked independently,and later together, as their estimates were consolidated.Neither one was allowed access to the UK offer until theirindividual estimates and mutually agreed estimates hadbeen finalised.

A schedule of just over 250 items was priced and a largemeasure of agreement existed in the estimates for thoseitems, put forward by each consultant. Where significantdifferences occurred the estimates were analysed to ensureboth had fully understood the specification, and lengthydiscussions took place on the technical suitability of plantbeing priced. For some items, the consultants agreed todiffer, and care was taken not to pressure them to conformin any way. In such cases both consultants' figures wereaccepted, giving a price band for the item. The end resultwas a 'schedule of fair market prices'. Because of the inclu-sion in the schedule of a number of price bands, it was notpossible to reach a single bottom line figure. Even so, thespread on the bottom line was only 3% and this gave agreat deal of confidence in entering negotiations.

The cost of financing is very important to a project. Asurvey of facilities available throughout the world wascarried out and it was apparent that government-guaranteed export credit loans are the most attractive.

The objectives set the CLP negotiating team were asfollows:

(a) to get as low a 1981 base price as possible, and cer-tainly consistent with the two consultants' figures

(b) to get as low an escalation multiplier as possible, and(c) to get the best financial terms available.

The deadline for continuing or breaking off to go to inter-national tender was set at the 16th March 1981.

The preparation for the negotiations enabled early iden-tification of items of plant which were highly priced.Within the time scale set, agreement was reached on thebase plant prices and extent of services.

On the question of the escalation multiplier, advantagewas taken of the UK Government ECGD's cost escalationlimitation scheme. As the wish was to develop the stationin two phases of two units each, the question of securing alimit to the escalation for phase II was a problem whichexercised the minds of those involved. Especially, as theECGD scheme is reviewed annually and there was no

IEE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984 233

guarantee of its continuance. The possibility of orderingtwo units with an option to purchase another one or twohad been considered. The solution finally agreed was toorder all four units with an option to cancel the thirdand/or fourth. This, incidentally, is the method used on theEHV network where the development is taking place inthree stages. The ECGD scheme allowed the contractorsto put forward a fixed-priced proposal as an alternative tothe variable and this is the arrangement finally contracted.As there are options to advance deliveries of plant, firmingfactors are identified in the contract to adjust the contractprice.

An ECGD-backed loan for the full value of the UK'sgoods and services was secured. Advantage was taken ofthe opportunity to obtain favourable terms for a generalpurpose loan, from those banks participating in the ECGDbacked loan.

On the successful conclusion of the above negotiations,a letter of intent was issued to GEC on the 30th March1981, and the contract was subsequently signed on the 27August 1981.

5.3.3 Project management: The picture would be incom-plete if some reference were not made to the third costcentre, that of project management. In the case of CastlePeak A Power Station, the civil design package, or designservice, was included in the overall M & E plant package.Preparation of civil contract documents, bills of quantityand working drawings was also included. Civil consultantswere retained to assist CLP with issue of enquiries, tenderevaluation, postcontract management, and site supervision.Buying the civil design with the mechanical and electrical(M & E) package meant that the plant contractor was con-tractually responsible for meeting civil/plant design inter-faces in a timely manner, important in view of the shortprogramme period.

The layout and design of the B Station had the advan-tage of a longer lead time prior to the preparation of theowner specification. CLP had already been able to deter-mine the location of the principal elements and assess thebelow-ground conditions in relation to foundation work,with the advice of the existing A Station consultants. Itwas therefore logical for CLP to exercise greater controland participation in the development of B Station civildesign. To carry out these functions effectively, it wasnecessary to reinforce CLP's civil engineering capability bythe appointment of the existing civil consultants, LGMouchel (LGM), within the UK package, to provide thefollowing services:

(a) design service(b) preparation of civil inquiry documents for civil con-

tracts(c) civil tender evaluation(d) postcontract services(e) site supervision of civil works as part of the inte-

grated site team

LG Mouchee have, at CLP's request, established a strongteam in Hong Kong supported by their UK head office, toact as civil co-ordinators and to carry out civil designlocally, where appropriate, for such things as the adminis-tration block, control block and ancillary buildings. Thiswas seen as an essential requirement as CLP, beingresponsible for the management of the civil/plant interfaceinformation, could also become deeply involved in civildesign and contracting.

Another part of the project management contained in

the UK package is the services through British ElectricityInternational (BEI), of the CEGB Engineering ServicesDepartment (ESD) and Generation Development andConstruction Division (GDCD). ESD now acts for CLP inexpediting work in the UK, in witnessing tests and inapproving and monitoring quality assurance programmes.The plant engineering services of the GDCD are usedintermittently for specialist support, supplementing CLP'sproject engineering resources. Successful start-up and earlyoperating depend to a large measure on operator training.To assist in this, a simulator replicating the plant is beingsupplied through BEI and is programmed to be in servicea year before commercial operation on the first unit.

The tempo for the project must be set by CLP. Thecentre of decision making is Hong Kong, where regularreview meetings are held. The plant suppliers, the civil con-sultant and the civil contractors all have offices set up inHong Kong. The word team is extensively used, andnowhere is the team spirit more evident than at CastlePeak itself. To retain expertise inhouse, erection and com-missioning of the plant is again being carried out by CLP,with specialist advisors, as necessary from the manufac-turers. As a consequence, rather a large CLP M & E forceis evident on site. Not so on civil works, here LG Mouchelprovide the majority of supervisory staff. From whateversource, however, CLP, GEC/BPL etc., LGM, BEI all aremembers of the one integrated site team under the SiteManager for erection, or the Commissioning Manager forcommissioning.

5.4 SummaryIn summary China Light and Power's strategy for CastlePeak B Power Station has been as follows:

(i) a very active involvement in project management,with as much work as sensibly possible being done inhouse

(ii) island approach, with few contractors, minimisingcontractor interfaces and providing the highest level ofconfidence in achieving the project programme

(iii) a single plant contract placed with GEC under theauspices of the UK government, after first establishing thecost competitiveness of the tender

(iv) a well proven plant, resisting changes to design,materials or manufacturing technique, using ESD andGDCD (through BEI) as monitors

(v) all four units to be identical, ordered together withoptions to cancel and/or advance the third and fourthunits

(vi) plant erection and commissioning by China Light &Power, augmented where necessary by specialist advisorsfrom the manufacturers and BEI

(vii) unit-simulator ordered, to ensure well trained oper-ators before plant start-up

(viii) internationally competitive finance secured for thefull value of the plant and services

(ix) same civil consultants, LG Mouchel, as used on theA station.

(x) few civil contractors, with proven track record,invited to tender with the result that five major contractshave been let to three contractors.

Having applied this strategy, the reader may be interestedin the present cost profile for the Castle Peak B PowerStation. Rearranging the cost centres in line with CLP'smethod gives:

CivilLand and site formation 1.3Civil construction 17.6

234 IEE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984

Plant FOBFour unitsSpares

Project ManagementProject control and support servicesCivil design and supervisionErection and commissioningPreoperations and trainingFreight and insurance

ContingencyFinancingTotal

37.61.1

2.71.37.31.22.25.9

21.8100%

Since the civil and plant contracts have been placed atfixed prices, estimates of escalation have been applied tothe remaining items and the figures shown are for the com-misioned plant.

6 Conclusion

China Light & Power has embarked on a major capitalexpansion programme to meet the sustained growth inelectricity demand in its supply area. Expenditure over thecurrent decade will exceed HKS35 billion. Major projectscompleted or in progress include the installation of500 MW of gas turbine plant, Castle Peak A and B PowerStations (4 x 350 MW and 4 x 660 MW, respectively) anda 400 kV bulk transmission system. This is in addition tothe routine work load of transmission, distribution andcivil works projects, which represent 40% of the totalinvestment.

Project strategies, developed from experience, have todate proved successful in meeting objectives. These stra-

tegies are based on the underlying principle of extensiveinhouse involvement in projects, accepting the risks of andrewards from that involvement. Experience has also shownthe importance of establishing trust and confidencebetween owner and contractor to meet the common goalof plant installations with a reliable and efficient per-formance; constructed and commissioned to programme,at a cost which ensures all parties profit from their enter-prise. Success achieved by CLP must rightly be shared byall who work in and with the Company.

7 Discussion

7.1 Guest Editor's comments on the PaperThe paper is extremely interesting because it gives veryvaluable information as to how a progressive utilitydevelops policies to meet a very large growth in electricitydemand within the political and economic constraints ofHong Kong. The issues as to what kind of plant should beordered, to what programme, by what contract strategy,who should be responsible for project management, fordesign, for supply, for construction, erection and commis-sioning, where the risks are to be taken, are all discussed.It is very unusual for a utility to publish this kind of infor-mation, which at the time of its development is kept con-fidential. By releasing the information, help is given toothers who find themselves in similar situations, with theneed to develop intelligent policies.

7.2 At the meetingThe discussion on this paper was combined with that forthe following paper, and is therefore to be found there.

IEE PROCEEDINGS, Vol. 131, Pt. C, No. 6, SEPTEMBER 1984 235