Re:
Dear Jeffrey
I am sending this to Peter in the next 20 mnts
The Rt Hon Lord Mandelson
Secretary of State for Business, Innovation and Skills
Department for Business, Innovation and Skills
1 Victoria Street
London
SW1H 0ET
5 November 2009
Dear Lord Mandelson,
DP World's development of London Gateway Port & Park (the =80 Project")
You will be aware of the imminent state visit of H.H Sheikh Mohammed bin Ra=hid al Maktoum (Prime Minister and Vice President UAE, Ruler of Dubai) to =he UK on 23 November, where he will meet with Prime Minister Rt. Hon Gordo= Brown. During this important visit we understand that the UK Government w=shes to announce that London Gateway will be proceeding. We agree that an =nnouncement of the UK's biggest inward investment, creating 44,000=jobs in the important Thames Gateway corridor is an excellent opportunity.=br>
You will recall from our recent meeting in London that the London Gateway f=nding process is underway. The initial feedback has been positive, however= it remains highly conditional in terms of debt levels and funding terms. =n particular, the UKFI banks have been notably more conservative than the =ontinental European banks, with RBS and Lloyds only committing to £75=million each (out of a total £672m first phase debt funding being sou=ht) and indicating levels of gearing and sponsor support which may prove t= be unviable for DP World.
DP World has worked with great endeavour since early summer alongside RBS (=ts lead adviser) to secure a successful project financing of the first pha=e of the port, with DP World proposing to inject some £445 million of=equity. We have explored all opportunities for non-UK based funding, inclu=ing overseas ECAs (no UK-based ones are available), TEN-T grants and EIB f=nding and have had considerable success with these European-based initiati=es. However, despite this and our readiness to commit significant equity, =he viability of the funding process is not certain. The reduction in PLA f=nding from over £80 million to £16 million has exacerbated the f=nding challenge, as has the ongoing inability to finalise the Network Rail=issues.
Unfortunately, as things stand we are not in a position to make any definit=ve statement about the Project during the state visit, which we believe wi=l be considered a missed opportunity by our respective governments. The on=y basis whereby DP World would be able to announce that the Project is pro=eeding is if we have funding certainty at that time. This would mean the U= Government confirming in advance of the state visit that:
- EIB will a=proved at least €300 million of funding plus mezzanine facility of=at least 15 per cent of the senior commercial loans on acceptable terms; a=d- =The UK Government is able to guarantee (wrap) the commercial funding and/o= commit TIFU/UKFI banks to meet any funding shortfall on appropriate terms=
If DP World is able to secure sufficient assurance on the above aspects, th=n we would be in a position to make a definitive announcement during the s=ate visit. Without such assurance, the viability of the Project's =unding remains uncertain.
We believe that our request is appropriate given the equity risk OP World i= prepared to take; the appetite shown by non-UK institutions to fund the P=oject; and the significant national benefits that will accrue to the UK sh=uld London Gateway be built.
We look forward to your considered response and I am available to discuss t=is with you at any time.
With kind regards,
Yours sincerely
Sultan Ahmed bin Sulayem
Chairman, DP World
Sent from my BlackBerry® wireless device
SMALL EDITS
DP World's development of London Gateway Port & Park (the =80 Project")
As I'm sure you are aware, H.H Sheikh Mohammed bin Rashid al Maktoum (Prime Minister and Vice President UAE, Ruler of Dubai) will lead a state visit to the UK on 23 November, where he will meet=with Prime Minister Rt. Hon Gordon Brown. During this important visit we understand that the UK Government wishes to announce that London Gateway will be proceeding. We agree that an announcement of the UK's creatin= 44,000 jobs in the important Thames Gateway corridor is an excellent opportunity, to publicize your commitment to emplo=ment.
You will recall from our recent meeting in London that the London Gateway funding process is underway. The initial feedback has been positive, however, it remains highly conditional in terms of debt levels and funding terms. In particular, the UKFI banks have been notably more conservative than the continental European banks, with RBS and Lloyds only committing to £75 million each, out of a total £6=2m first phase debt funding being sought. These levels are insufficient.
DP World has worked diligently since early summer alongside RBS (its lead adviser) to secure successful project financing of the first phase of the port, with DP World agreeing to inject £445 million of equity. We have explored the opportunities for non-UK base= funding, including overseas ECAs (no UK-based ones are available), TEN-T grants and EIB funding and have had considerable success with these European-based initiatives. However, despite this and our readiness to commit significant equity, the viability of the funding process is still not certain. The reduction in PLA funding from over =C2 80 million to £16 million , as well as the inability to finalise the Netw=rk Rail issues has exacerbated the funding challenge.
Unfortunately, as things stand we are not in a position to make any definitive statement about the Project during the state visit, which we believe will be considered a missed opportunity by our respective governments. DP World would only be able to announce that the Project is proceeding is if we have confirmed funding at that time= This would mean the UK Government confirming in advance of the state visit that:
EIB will a=proved at least €300 million of funding plus mezzanine facility of at least 15 per cent of the senior commercial loans on acceptable terms; and- =AO The UK Government will guarantee (wrap) the commercial funding and/or commit TIFU/UKFI banks to meet any funding shortfall on appropriate terms.
If DP World is able to secure sufficient assurances we would th=n be in a position to make a definitive announcement during the state visit. Unfortunately without such=assurance, the viability of the Project remains uncertain.
We believe that our request is appropriate given the equity risk DP World is prepared to take; the appetite shown by non-UK institutions to fund the Project; and the significant national benefits that will accrue to the UK should London Gateway be built.
We look forward to your considered response and as always, I am avail=ble to discuss this with you at your
convenience.
With kind regards,
Yours sincerely