Decision Maker: Cabinet
Decision status: For Determination
Is Key decision?: No
Is subject to call in?: No
1. The Cabinet adopted Option 2 as their preferred option.
2. The Cabinet agreed that a loan facility of £15m be provided to MMD (subject to decisions 3, 4 and 5 below) for the necessary Capital Investment required to deliver a return of £19.3m over the 5 year period 2019/20 to 2023/24, which was approved in principle by City Council on 12 February 2019.
3. The Council loan is provided at a rate consistent with State Aid rules.
4. Any draw down on the loan facility by MMD is subject to the following:
a) The 20 Year Business Plan demonstrates the continuing viability of MMD and that the continued operation of MMD continues to deliver the best financial return compared with all other viable alternatives.
b) The Capital Investment is necessary either for the sustainability of existing income streams or for the generation of additional income.
c) The proposed Capital Investment itself represents the most favourable return when assessed against the balance of:
i) The financial return on a Net Present Value basis and over the whole life of the asset created versus other potential options for the same outcome.
ii) The relative risk of each alternative option.
5. Continued parent company support and the availability of the loan facility is subject to the annual review and approval of a satisfactory 3 Year Business Plan and 20 Year Future Forecast which must demonstrate to the shareholders satisfaction that:
i) The assumptions that underpin the 3 Year Business Plan are robust with a more than reasonable chance of being achievable.
ii) That the 3 Year Business Plan is prepared to illustrate the financial effect of reasonable optimistic and reasonable pessimistic scenarios in order that the Shareholder is aware of the reasonable range of risk associated with the "Base Case" Business Plan.
iii) Recognising the exposure of the company to cyclical trade factors and adverse weather, that the overall 3 to 5 Year financial results of the Company provide an overall net return to the Shareholder over the period taking into account all returns received by the Shareholder through rents, dues and all other profit elements of services provided by the Shareholder (including the Portsmouth International Port).
6. The Council keeps under review the returns that would reasonably be expected to be achieved from alternative uses of the site, undertaking a formal review at the earlier of every 3 years or failure to achieve the financial performance set out in resolution 5 above.
7. That there be an annual information report to Council setting out the financial position of MMD.
Report author: Mike Sellers
Publication date: 28/02/2019
Date of decision: 26/02/2019
Decided at meeting: 26/02/2019 - Cabinet