§ Lord Oakeshott of Seagrove Bayasked Her Majesty's Government:
Whether they will immediately place in the Library of the House the final version of the letters of comfort underwriting 95 per cent of the third party debt for London Underground, drafts of which were placed in the Library on 20 March; and [HL4237]
Whether they will immediately place in the Library of the House the final version of any letters of comfort, whether or not in respect of third party debt, which have been issued in connection with the share purchase agreements signed on 8 May between London Underground and Tube Lines Ltd and the Metronet consortium. [HL4240]
§ The Minister of State, Department for Transport, Local Government and the Regions (Lord Falconer of Thoroton)No comfort letters have yet been issued in respect of the Tube modernisation contracts. As my right honourable friend the Secretary of State's Minute to Parliament on 20 March explained, they will be issued shortly before the Tube modernisation transactions are completed.
57WA
§ Lord Oakeshott of Seagrove Bayasked Her Majesty's Government:
How much money will be borrowed under the cover of the letters of comfort underwriting 95 per cent of the third party debt for London Underground; for how long a term; and at what rate of interest; and [HL4238]
How much higher a rate of interest would, in their estimation, he necessary had the letters of comfort underwriting 95 per cent of the third party debt for London Underground not been issued. [HL4239]
§ Lord Falconer of ThorotonThe proposed comfort letters clarify the Secretary of State's role in relation to the Greater London Authority and Transport for London. They do not create binding obligations and do not underwrite 95 per cent of the third party debt for London Underground. The amount of finance each of the bidders is expected to raise was stated in the draft comfort letters that were reported to Parliament on 20 March. Shareholders themselves are expected to provide some £500 million of this total.
The proposed comfort letters were discussed and agreed with bidders as part of the wider negotiations on the Tube modernisation plans. It is not possible to estimate the effect one single element of these negotiations, such as the comfort letters, might have on the rate of interest paid on third party debt; nor is it possible at this stage to state the detailed terms of the third party finance being raised for the Tube modernisation plans. These will be finalised as part of the process to financial close on the transactions.
§ Lord Oakeshott of Seagrove Bayasked Her Majesty's Government:
Further to the Written Answer by Lord Falconer of Thoroton on 8 May (WA 184), why they stated that they had placed in the Library of House a copy of an updated Ernst & Young "value for money" review of the public/private partnership proposals for London Underground, when the Library had still not received this document by 4 pm on Thursday 9 May. [HL4274]
§ Lord Falconer of ThorotonA copy of the updated Ernst & Young value for money review of the London Underground PPP was delivered to the Library of the House on 8 May. At the request of the Library, a further copy of the document was sent to the Library by facsimile on 9 May. I understand that the noble Lord now has a copy of it.
§ Lord Oakeshott of Seagrove Bayasked Her Majesty's Government:
In relation to the share purchase agreements signed on 8 May between London Underground and Tube Lines Ltd and the Metronet consortium, what is the difference between "commercial closure" of the agreements and "financial closure" which has not yet taken place. [HL4275]
§ Lord Falconer of ThorotonCommercial closure on the Tube modernisation contracts was reached on 8 May 2002. It marked the point at which London58WA Underground Limited signed agreed contract terms with the bidders. They have signed on the basis that a number of "conditions precedent" must he fulfilled before the agreed contracts can come into effect. The conditions precedent relate to issues such as the financing of the modernisation contracts and regulatory consents, including acceptance of the safety case. Financial close will not take place until these conditions precedent have been fulfilled.
§ Lord Oakeshott of Seagrove Bayasked Her Majesty's Government:
In relation to the share purchase agreements signed on 8 May between London Underground and Tube Lines Ltd and the Metronet consortium, what would be the cancellation costs to the taxpayer if it does not ultimately prove possible to secure "financial closure" of these agreements. [HL4276]
§ Lord Falconer of ThorotonIn the event of financial close not being reached because of the bidder's failure to maintain a value for money bid, no compensation is payable.
However, London Underground has agreed to compensate bidders if the competition should be terminated for reasons other than bidders failing to maintain value for money bids. On the two deep Tube competitions, the preferred bidder would receive up to £12 million in respect of the period up to 7 February 2002, with up to £7 million available for the reserve bidder. On the sub-surface line competition, where three bidders were short-listed, they will receive up to £7 million each for costs incurred during this period. In such circumstances, London Underground has also agreed to compensate bidders for 90 per cent of eligible costs incurred after 7 February 2002.