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3 Feb 2003 : Column 60W—continued

Operational Capacity

Dr. Julian Lewis: To ask the Secretary of State for Defence what estimate he has made of the capacity of the (a) Royal Navy and (b) Royal Marines to engage in operations other than in the Gulf with the personnel and equipment not despatched to the Gulf. [94530]

Mr. Ingram : I am withholding details of capability in accordance with Exemption 1 of Part II of the Code of Practice on Access to Government Information (Defence, Security and International Relations).


Llew Smith: To ask the Secretary of State for Defence what safeguards were built into the partial sell-off of QinetiQ to protect intellectual property rights held by DSTL. [93887]

Dr. Moonie: The Ministry of Defence has retained full ownership for Intellectual property that was generated and predominantly used within that part of DERA which became Dstl. QinetiQ has no rights in this intellectual property. Additionally MOD has free rights of continued use for defence and security purposes of the Intellectual Property that was transferred to QinetiQ at Vesting.

Llew Smith: To ask the Secretary of State for Defence what process was used by his Department to determine the balance of debt and equity in the sell-off of QinetiQ. [93888]

Dr. Moonie: When QinetiQ was created as a plc it had to purchase its assets from the Ministry of Defence. The MOD required the company to purchase these with a combination of shares and interest bearing loan notes payable to the MOD.

The split between debt and equity was made following specialist advice to MOD from its external banking advisors and discussions with QinetiQ senior management.

In creating a new company it is usual to inject a degree of debt into the capital structure; this ensures that management have the correct incentives to manage cashflow and capital expenditure in a prudent manner.

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As is customary in leveraged transactions the bidder indicated its preferred capital structure for the business. The MOD has sought professional advice at each stage of the process to ensure that the levels of debt and equity are sustainable and will ensure the future financial stability of QinetiQ.

Llew Smith: To ask the Secretary of State for Defence what formula was used by his Department to calculate the value of QinetiQ prior to its partial privatisation. [93890]

Dr. Moonie : In order to inform the decision process and the negotiations with potential bidders the Ministry of Defence had obtained valuations for QinetiQ at various stages of the PPP. Prior to the sale MOD's advisors undertook a valuation based on the information provided to potential purchasers in the QinetiQ information memorandum. Their valuation approach was to use two methods, a discounted cashflow analysis and an analysis of comparable trading companies.

The discounted cash flow was based on the company's financial model and made use of cost of capital estimates provided by advisors.

The analysis of comparable companies attempted to provide a price for QinetiQ based on other firms in the same sector. QinetiQ is a complex business operating in several different sectors. In order to derive a more accurate view of the overall value the comparison was based on sub-divisions of QinetiQ which were compared to a selection of companies in the same sector.

Llew Smith: To ask the Secretary of State for Defence what expenditure was incurred in the sell-off of QinetiQ (a) in consultancy payments by his Department, (b) by DERA, (c) by QinetiQ, (d) by DSTL and (e) by other parties. [93892]

Dr. Moonie: The total forecast costs to the Ministry of Defence of consultancy, up to completion, is expected to be £17 million. This covers all stages of the Defence Evaluation Research Agency (DERA) Public Private Partnership (PPP), including the detailed options study, public consultation process, vesting of QinetiQ as a plc and completion of the sale of shares in the company.

The total cost of the PPP falling to DERA was £39.3 million, which includes consultancy costs. The total cost of the PPP falling to QinetiQ through to completion is expected to be £18.7 million, including consultancy fees, information technology and infrastructure costs. The total PPP cost falling to DSTL was £3.3 million, which was mostly infrastructure costs.

The competition attracted interest from around 40 potential investors. We have no information regarding how much was spent in total by these potential investors throughout the process.

Llew Smith: To ask the Secretary of State for Defence what formula was used by his Department to calculate the contaminated land liabilities associated with the assets held by QinetiQ; and if he will make a statement on the value put on these liabilities by the Carlyle Group in its investment negotiations. [93891]

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Dr. Moonie: Responsibility for almost all historic and all future environmental liabilities on freehold sites owned by QinetiQ transferred from the Ministry of Defence to the company on 1 July 2001. Following extensive discussions with insurance advisers and other technical specialists, MOD concluded that there were a small number of uniquely military potential liabilities which could not be transferred on terms which represented good value for money. These potential liabilities, identified in the Departmental Minute laid before Parliament on 8 July 2002, relate to work carried out over many decades by the Defence Evaluation and Research Agency (DERA) and its predecessors. This includes work carried out under the conditions of World War 2. Responsibility for these liabilities has always rested with the Ministry of Defence.

There is no cost-effective method of comprehensively identifying or quantifying these liabilities. MOD and DERA did, however, carry out land quality assessment studies on the properties and examine existing records and claims history. On this basis we conclude that the actual risk of MOD incurring these liabilities is extremely low. The decision to retain these liabilities was taken before the appointment of The Carlyle Group as preferred bidder for QinetiQ and followed advice from external advisers that potential purchasers would either refuse to accept these risks or would demand a substantial and disproportionate reduction in the price paid.

Radio Mast (Lagopatria)

Mr. Steen: To ask the Secretary of State for Defence pursuant to his answer of 21 January, Official Report, column 209W, when the Italian authorities declined to grant the use of a viable radio frequency from Lagopatria for the British forces. [94312]

Mr. Ingram: Records relating to the precise date of an approach to the Italian authorities are not held by the Ministry of Defence. MOD officials have been advised by the Services Sound and Vision Corporation (SSVC), which at the time had lead responsibility, that the approach is thought to have been made in approximately 1994–95. However, SSVC further advise that specific records for that period are no longer held.


Mr. Keetch: To ask the Secretary of State for Defence in which countries the UK is recruiting personnel for service in the armed forces; and if he will make a statement. [94574]

Dr. Moonie: While employment in the armed forces is open to citizens of Commonwealth countries and Republic of Ireland nationals as well as British citizens, the services do not actively recruit overseas. Over the last three years, however, the Royal Navy and the Army have sent selection teams to some Commonwealth countries (eg Fiji, St. Lucia, St. Vincent and the Grenadines) at the specific request of the Government concerned, and only when evidence suggests that there is sufficient interest among the local population to merit a visit. The selection teams screen out those who are not thought capable of meeting the full entry standards to save applicants the cost of a potentially nugatory trip to the United Kingdom to undergo the recruitment

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process. All applicants, regardless of nationality, are given equal consideration and all have to meet the same basic entry standards.

Reserve Call-up

Mr. Grieve: To ask the Secretary of State for Defence how many members of the Territorial Army called up for service in the Middle East have not completed their basic training. [95349]

Dr. Moonie: As at 30 January 2003, all members of the Territorial Army called up for service under section 54 of the Reserves Forces Act 1996 for operations in the Middle East have completed their basic military training.

Royal Navy Firefighters

Mr. Keetch: To ask the Secretary of State for Defence how many Royal Navy firefighters are (a) with the task force and (b) on each ship; what the required number is of firefighting personnel on each ship; and if he will make a statement. [93935]

Mr. Ingram : I refer the hon. Member to the answer I gave on 22 January 2003, Official Report, column 327W, to the hon. Member for Runnymede and Weybridge (Mr. Hammond). Royal Navy vessels do not sail without a full complement of damage control and fire-fighting capabilities and that level of support varies from ship to ship. Fire-fighting is not however an individual specialisation. All Royal Navy personnel are trained to fight fires. This training includes training in the use of safety equipment, breathing apparatus and damage control. The level of that training is appropriate to the role they will fulfil at sea. In addition, on each ship, there will be individuals qualified to provide training in fire-fighting. Each ship in the Royal Navy is fully equipped and has the trained personnel to deal with fire hazards. This capability is regularly tested by means of fire-fighting drills.

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