Select Committee on Public Accounts Minutes of Evidence

Annex E

Copy of a letter from Mr David James, Executive Chairman, NMEC, to Mr Guy Hands, Dome Europe PLC

  Although I recognise that you have now withdrawn your interest in acquiring the Dome and its operating assets, I still feel it appropriate to comment on the issues raised in your letter of 11 September 2000 to John Walker. I refer to your own paragraph numbering.

  1.  It was identified early in the process that the NMEC financial records are not supported by a detailed asset register allowing recognition of individual assets. In the clarificatory correspondence it was agreed that a list would be compiled by your advisors for identification purposes only.

  You are now seeking to include this listing in the contractual documents and to adjust value if all identified assets are not handed over to you at Completion. This would be a variation to the Heads of Terms agreed between the parties.

  NMEC have expressed concern at this as the list is very detailed (800 pages) and an extensive checking exercise would be required before NMEC could contractually underwrite its accuracy. NMEC did, however, indicate a willingness to provide such comfort if Dome Europe would provide NMEC with the list of values corresponding to the asset list, so that NMEC can focus its limited resources onto areas of high value.

  This request was faxed to your office on Friday 8 September. Despite having teams working at NMEC and available to your staff throughout the weekend, we have not yet received any response to this constructive suggestion for a way forward.

  The real issue here is the Dome was set up as a temporary exhibition and some of the content was obtained on licence on that basis. Your bid was predicated on an intention to replace 70 per cent of the Dome content. Over recent weeks your intention has changed such that you now wish to retain most of the existing content. We have been working with you to achieve this.

  2.  The uncertainty regarding intellectual property has been recognised by both NMEC and Dome Europe. In a meeting with myself and John Darlington last Thursday 7 September, you indicated a willingness to accept the risk associated with this, provided that NMEC used reasonable endeavours to identify and secure transfer of all intellectual property rights.

  Following that meeting I immediately drafted in a team of five professionals from Simmons and Simmons to accelerate NMEC's activity to resolve this question.

  I am disappointed that your latest position reflects neither the discussions we had nor the actions I have taken in response.

  3.  We have explained to you that the major part of the contracts excluded from the first-round data room can be explained by:

    (i)  Construction contracts which have no relevance for the transaction being contemplated.

    (ii)  Sub-contracts to the main agreements previously disclosed.

  You have been aware of this for several weeks, and yet only requested information two days ago.

  4.  Your fear that you cannot rely on rights under the construction contracts because of potential breaches of these contracts by NMEC are unfounded. Your specific concern relates, I believe, to repairs undertaken to the roof fabric of the Dome.

  David Trench CBE, our Site, Structures and Transport Director has confirmed that we have complied with the contract with Birdair and that a 12-year warranty against defects and latent defects is in force. He has written a detailed report on this matter which is available for inspection by your team.

  5.  We have disclosed details of the current position with each of the sponsors, and have made you aware of provisions created against receivables.

  At our meeting last night you referred to a £3 million shortfall against amounts contracted with one specific sponsor. You are wrong on this point—the £3 million has been received in full.

  Assets owned by the sponsors have been fully disclosed on the Excluded Asset Listing; again, this is not news.

  6.  PY has advised me that he last met with Dome Europe on 30 August 2000. At that meeting he stated that, whilst the internal management target remained at 6 million RGV's this year, a more realistic forecast would be 4.75 million.

  (Note: in the interests of prudence, the most recent grant application was predicated on 4.5 million RGV's but the NMEC forecast is still 4.75 million).

  Pricing was discussed also at that meeting. PY indicated the need for ongoing promotional activity. He felt that this position had been both understood and supported by Dome Europe.

  You should note also that your team have been informed weekly of actual visitor numbers by e-mail. It is surprising, therefore, that you have only recently identified this as an issue.

  At yesterday's meeting you referred to a "discrepancy" of £2 million in the revenue calculations disclosed to your team by NMEC. We have not been able to identify any such difference.

  7.  We have not formally disclosed the PricewaterhouseCoopers report to you as it is currently being considered by the National Audit Office, and it would be incorrect for us to disclose it before the process of review and presentation to the PAC is completed.

  The senior partner from PwC, Richard Boys-Stones, has provided your team with a full and detailed explanation of the matters contained therein, and also the consequences of your financial modelling and business planning. The PwC report does not identify any areas where ongoing costs have been materially mis-stated.

  8.  You have alleged that you are receiving calls on a daily basis from suppliers claiming ownership of certain assets used in the Dome. You have not provided NMEC with any specific information to allow us to investigate these claims.

  As I indicated last night, I do not believe that any of the information provided constitutes a material change to the business proposition. I am surprised and disappointed that you have elected to withdraw from the transaction, particularly in view of our response to your request for an improved flow of information.

David N James

Executive Chairman

For the New Millennium Experience Company

12 September 2000

Copy of a letter from Mr Guy Hands, Dome Europe PLC, to Mr John Walker, Competition Director, English Partnership

  As you know over the last six weeks, both verbally and in writing, I have expressed the continuing commitment and willingness of Dome Europe to move forward and to exchange contracts to acquire the Dome. As you are aware we have had a team of some 200 people from 40 different partner organisations at a cost that is now in the vicinity of £10 million working enthusiastically to achieve the Dome Europe vision.

  However, the following issues cause me deep concern.

  1.  The fact that there is no New Millennium Experience Company asset register or agreement with NMEC on exactly what assets are owned by them and, accordingly, no comfort for us that we are able to buy the assets that comprise the Dome business as a leisure attraction. In fact NMEC has now said they cannot agree the asset register we have compiled being included as part of the contract nor can they give any form of title guarantee with regard to the assets, even though this has always been on offer.

  2.  The fact that there is no register of intellectual property associated with the various elements of the NMEC and that NMEC will provide no indemnity for any claims that could arise because of this. Consequently, there is no comfort that we will be able to continue to operate the assets that make up the leisure attraction.

  3.  The fact that 1,100 contracts were disclosed to us in the data room. We now understand there are in the vicinity of 2,800 and new contracts continue to be disclosed to us.

  4.  New information has come to light indicating that potentially we cannot rely on rights under the construction contracts because of potential breaches by NMEC of those contracts or a failure to comply with agreed maintenance and repair procedures.

  5.  The fact that we now understand there are disputes with various sponsors and the sponsors could have claims relating to various assets of the Dome, including items core to the project.

  6.  The fact that visitor numbers have been misrepresented to us, even as recently as two weeks ago when PY Gerbeau said the Dome will still have around six million paying visitors this year. Furthermore, NMEC's undertakings to Dome Europe on ticket price discounting have been broken thus undermining the value of the on-going business.

  7.  The fact of the PriceWaterhouseCoopers report, which clearly reveals critical new information about the costs and liabilities of the Dome on which we have had a verbal briefing but which we have not seen, even though David James has stated to us "we don't trust anything given to us in this place".

  8.  The fact that we are receiving calls on a daily basis from suppliers of equipment to the Dome informing us in their view they own certain assets used in the Dome and to the extent that we wish to continue using these assets we will be required to pay separately for them.

  Taken together, these facts leave me with no alternative but to withdraw from the process and allow you to look elsewhere for alternative solutions to the situation. Whilst we continue to believe a successful leisure attraction can be operated at the Dome, we have failed to obtain the necessary level of openness and help from NMEC in order to provide us with the necessary comfort needed to take over the leisure attraction that is the Dome, on schedule. Our current belief is the earliest we could reopen based on full co-operation from NMEC is next June.

  We had a clear vision for taking this project forward and providing a sustainable leisure attraction in Greenwich. It is a matter of deep sadness and regret to me that I am writing this letter to you after over nine months of total commitment and hard work by my team. However, I am accountable to my shareholders and on business grounds, I am left now with no choice.

  I would like to take this opportunity to thank you personally and your direct advisors and English Partnerships for your help and enthusiasm in sharing our vision for the Dome.

Guy Hands

Dome Europe PLC

11 September 2000

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