HC Deb 13 March 1959 vol 601 cc143-5W
Sir P. Roberts

asked the Paymaster-General whether he is yet in a position to report the outcome of the negotiations with Richard Thomas and Baldwins Limited for the construction of the new strip mill near Newport, Monmouthshire.

Mr. Maudling

Yes. Agreement in principle has now been reached with Richard Thomas and Baldwins Ltd., under which the Minister of Power will lend up to a maximum of £60 million towards the construction of an integrated steel works, including a semi-continuous hot strip mill, on a site near Newport (Monmouthshire).

This project, which is estimated to cost approximately £100 million, is the most important element in an extensive programme of new construction and modernisation for which the company has now secured the consent of the Iron and Steel Board and the approval of the Iron and Steel Holding and Realisation Agency, its present owner. The balance of the programme, involving works at Ebbw Vale and Redbourn (Lincolnshire) will be financed by the company with assistance from the Agency under their normal arrangements.

It is hoped that construction work on the Newport project can begin this summer. The plant should come into operation during 1963. It should have a significant output in 1964 and reach full production in 1965 or 1966. Its capacity will then be about 1,000,000 tons of ingot steel per annum.

It is intended that, when complete, the Newport plant should produce at least 600,000 tons of finished strip mill products and that, to the extent necessary, it should also meet any deficiency in steel requirements at Ebbw Vale. At Redbourn, whose steel will no longer have to be sent to Ebbw Vale, it is proposed to construct a continuous billet mill to process the plant's output.

The Newport mill will be capable of conversion to fully continuous operations if increased capacity should be required in the future.

Heads of Agreement between Her Majesty's Government and Richard Thomas and Baldwins Ltd. are as follows:

  1. 1. The Minister of Power on behalf of Her Majesty's Government undertakes to provide a loan to Richard Thomas and Baldwins Ltd., up to a maximum of £60 million for such developments at Newport as may be approved by the Iron and Steel Board in connection with the manufacture of strip mill products.
  2. 2. The loan may be drawn in ten tranches over five years provided that only one tranche may be drawn in any one of ten consecutive periods of six months each, the first beginning on 1st October, 1959.
  3. 3. The amount of the tranche to be drawn in any period shall be settled by the Minister in the light of the actual capital expenditure on the Newport project in the preceding period, and subject to a contribution from the Company's accruing cash resources to be determined by the proportion which the capital expenditure at Newport bears to the Company's total capital expenditure during that period.
  4. 4. Interest on each tranche of the loan will accrue from the date it is drawn, at a rate to be determined by the Treasury and such 145 rate will apply throughout the currency of that tranche. In determining the rate of interest applicable to each tranche, the Treasury will have regard to the cost of borrowing by Her Majesty's Government at that date for a similar period.
  5. 5. Interest will be payable annually on 30th September.
  6. 6. Capital expenditure carried out on the Newport project by any part of the Company's own organisation will be charged at cost.
  7. 7. At any time during the currency of the loan the Company, if so requested by the Minister of Power, will create such security in favour of the Minister over the whole of the assets of the Company as he may require.
  8. 8. The Company will repay the loan not later than 1st October. 1971.
  9. 9. The Company may at any time in advance of the due date for repayment repay at par any tranche of the loan or any part of any tranche provided that:—
    1. (i) one month's notice of such repayment is given;
    2. (ii) the interest on the tranche concerned has been paid up to the date of repayment and other interest due on the loan has been paid up to the previous 30th September;
    3. (iii) the tranches are repaid in the same order as they have been drawn.
  10. 10. The Company will forthwith increase its borrowing powers by such amount, having regard to this agreement, as the Minister of Power and the Iron and Steel Holding and Realisation Agency in consultation may determine, and will not during the currency of the loan further increase its borrowing powers without the consent of the Minister of Power.
  11. 11. The Company will not, without consent of the Minister of Power, borrow during the currency of the loan any money ranking in priority thereto.
  12. 12. The Company will not during the currency of the loan commit itself to any further major development or investment without the consent of the Minister of Power.
  13. 13. The arrangements set out in this Memorandum may be revised in whole or in part if the Agency wish to reorganise the capital structure of the Company.