PRIVATISATION OF THE ROLLING
STOCK LEASING COMPANIES (PAC 97-98/304)
Copy of correspondence between the clerk
of the committee and Mr Robert H Tucker, Executive Vice Chairman,
GE Capital
It was good to speak to you last week and to
learn from you that, while you are unable to be in this country
on 3 June when the Committee is due to take evidence on the privatisation
of the rolling stock leasing companies, you are willing to contribute
to the inquiry by submitting a paper with your observations on
the process.In order to give some indication of those areas on
which the Committee wish to focus, I enclose a list of questions
for you to consider. Equally, should you wish to draw the Committee's
attention to other aspects of the sale, that would be perfectly
acceptable.It would be quite useful if your paper could be completed
in time to be returned to me no later than 20 May.For your convenience,
I enclose a copy of the NAO Report to which you will have contributed
but which you may not have to hand. I shall also ensure that you
are kept informed of the progress of the Committee's inquiry and
are sent a copy of its subsequent report.Many thanks for your
promised cooperation.
Clerk of the Committee
29 April 1998
1. Paragraph 2.45 of the NAO's report says
that GE Capital notified their intention to withdraw from the
sale only 48 hours before final bids were due. The main reasons
appear to have been uncertainty about the outcome of the rail
privatisation programme and concern about exposure to damages
for environmental hazards. Were there any other reasons for your
company's withdrawal from the sale at that late stage?
2. Can you please explain in more detail
what specific concerns you had resulting from uncertainty at that
time about the outcome of the rail privatisation programme?
3. Paragraph 4.4 of the report shows that
the Department of Transport were giving purchasers indemnities
covering industrial disease, industrial injury and damage to property
arising from environmental hazards. To what extent did these indemnities
fail to address your concerns?
4. Is there anything that the Department
of Transport or Hambros could have done which would have helped
resolve your concerns and encouraged you to make a final bid?
5. In your view did the management of each
of the rolling stock leasing companies present a fair and balanced
view of the companies' prospects?
6. Were the managers of each of the three
companies open and balanced in their dealings with you and your
team? Were you put off from making a bid by anything the management
told you or refused to tell you?
7. What was your view at the time of the
prices at which the Department sold the companies? How do these
prices compare with any final prices that you were thinking of
offering before you withdrew from the sale?
8. You told the NAO (paragraph 2.56) that
provision for sharing in gains from the onward sale of the companies
would not necessarily have deterred you from bidding, although
such provisions would have impacted adversely on the sale price.
Could you please expand on the circumstances in which such an
arrangement would have been acceptable to you if you had been
a winning bidder?
9. In your view was the sale process effective?
What could the Department of Transport and Hambros have done to
make the sale process more effective?
Clerk of the Committee of Public Accounts
29th April 1998
Further to your kind offer to provide comment
on the privatisation of the rolling stock leasing companies and
my recent letter giving a list of subject areas of interest to
the committee, I would ask you to include in your consideration
the extent to which any prospect of nationalisation may have affected
your approach.
Clerk of the Committee
1 May 1998
The following are responses to your questions
of me contained in your letters dated 29 April 1998 and 1 May
1998.
1. There were several other factors relating
to our withdrawal from the bidding. However, the primary factors
were the ongoing uncertainty relative to the outcome of rail privatization
and our potential financial exposure related to prior environmental
issues.
2. Our concern was that the rail privatization
would be halted subsequent to the sale of the ROSCOs. Rather than
having a customer base of 25 train operating companies, we would
have a customer base consisting solely of British Rail.
3. We
did not believe the indemnities offered fully protected us from
liabilities which had been incurred prior to the privatization
and over which we had no control.
4. Had we been provided with indemnities
which were satisfactory to us, there would have been a greater
likelihood that we would have bid.
5. In my view, the managements did present
a fair view of the companies' prospects.
6. I believe that the managers were open
and balanced in their dealings. Nothing they said or did not say
affected our decision.
7. The prices at which the companies were
sold were in a range which we were prepared to offer.
8. To the extent the provision for sharing
gains was limited in time such that the benefits of our future
investment or efforts to improve the efficiencies of the companies
did not accrue to a third party, we would probably have accepted
such an arrangement.
9. In my view, the sale process was effective,
given the difficulties involved. I believe the Department of Transport
could have been more forthright in offering the environmental
indemnities we sought.
In response to your handwritten query, the prospect
of renationalization was of some concern to us but was not the
primary reason for our decision to withdraw from the bidding.
Robert Tucker
Executive Vice Chairman
G E Capital
19th May 1998
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