Contingent Liabilities relating to the Wales Millennium Centre

On Monday 14th January I tabled a statement in which I proposed to authorise a Notifiable Transaction to which Standing Order 19.13 applies, namely the disposal of the land at an undervalue to the Wales Millennium Centre Company for the purpose of constructing and operating the Wales Millennium Centre.  That statement indicated that it would also be necessary to enter into separate agreements with Cardiff County Council and Grosvenor Waterside, which would contain contingent liabilities.  In the plenary debate on 22 January I explained that details of those contingent liabilities were still being negotiated at that time, and I anticipated that it would become necessary for me to authorise the terms of those agreements in accordance with the urgency procedure under Standing Order 19.  I am now providing details of those transactions in accordance with Standing Order 19.20.  

Before describing the details of the contingent liabilities which have been entered into with Cardiff County Council and with Grosvenor Waterside it will be helpful to remind the Assembly of the history of the WMC site and why the need for these liabilities has arisen.  When Cardiff County Council bought the site for the Wales Millennium Centre from Grosvenor Waterside plc last year, Grosvenor Waterside agreed to sell at less than what they considered to be full market value.  They did so because they saw the WMC as a prestige project which would enhance the value of their other land holdings in the vicinity. Grosvenor Waterside did however obtain from Cardiff an undertaking that they would be compensated to the full value of the land if the WMC project did not start on site by March of this year.

Cardiff County Council purchased the site from Grosvenor Waterside for £2.5 million.  As part of the transactions which have recently been completed, the Council has transferred the site to the Assembly for a nominal sum.  The Council was only prepared to do this, however, if they were released from their undertaking to Grosvenor Waterside and if the National Assembly would enter into new undertakings with the Council to compensate the Council if the WMC project did not proceed.

The plan which I agreed with Cardiff and Grosvenor Waterside, and which has now been implemented, is made up as follows:-

Firstly - the Council has transferred ownership of the site to the National Assembly at no cost.

Secondly - the Assembly has given a licence to the WMC Company to enter the site and commence construction and has agreed to grant a lease of the site to WMC for a peppercorn rent – that lease will be formally granted once the Charity Commission has given its approval to a legal charge in favour of the Assembly to protect its grant.

Thirdly – Grosvenor Waterside has released Cardiff from its undertakings given in 2001.

Fourthly – the Assembly has given new undertakings to Cardiff and to Grosvenor Waterside which will compensate those bodies if the WMC is not fully built.

The negotiations leading to these transactions were concluded on the same date as the contract was awarded by Wales Millennium Centre to Sir Robert McAlpine to construct the centre.  To avoid disruption to the agreed contract timetable, upon which the contract price was based, it was necessary for me to enter into the contingent liabilities with the Council and Grosvenor Waterside without prior notification to the Assembly under Standing Order 19.13.  My expectation that this would be the case was drawn to your attention  in the plenary debate on the WMC on January 22nd this year.

I turn now to the details of those Transactions which contain contingent liabilities and on which I am required to report pursuant to Standing Order 19.20.

An agreement has been entered into with Cardiff County Council which provides for payments to be made by the Assembly to the Council in the event that the Wales Millennium Centre is not substantially commenced or in the event that the Centre is not completed, leading to a sale of the site.  This agreement reflects the fact that the Council has transferred land to the Assembly at nil consideration.  

Payments may arise in two separate and distinct sets of circumstances.  

The first contingent liability is confined to the initial commencement phase of the project.  The Assembly is required to make a payment of £2.83 million to the Council in the event either that works have not been commenced, or are not being diligently progressed within six months of the grant of the Lease (or if there is any impediment to the grant of the lease, within six months of the date on which the lease would have been granted).

I am delighted to be able to report that works have commenced and that considerable progress is being made on site.   The Charity Commissioners approval is still awaited to the Assembly’s legal charge which will then lead to the grant of the lease.  It is currently anticipated that this will be in place by 10 June 2002.

Once the period of six months from the grant of the Lease has expired, the contingent liability to pay £2.83 million to Cardiff will fall away and a more limited contingent liability to Cardiff County Council will take effect.  At that stage, the land value contribution of £2.83 million from Cardiff County Council will be treated the same as the grant funding provided by the other Public Sector Funders, namely the Assembly, the Millennium Commission and the Arts Council for Wales in the event that the Centre is not completed and the land is sold.  If there is an Event of Default by WMC under the Lease, as a result of which the Assembly (or other Funder) realises its security by selling the site, the Assembly will apply any proceeds of sale it might realise firstly to discharge any outstanding liability of WMC to its Leasing Bank secondly to discharge any outstanding liability to the Public Sector Funders in proportion to their relative contributions and finally to pay any balance remaining to Grosvenor Waterside. This contingent liability is confined to funds realised on a sale of the site, and would have no impact on the Assembly’s wider resources.

A separate agreement has been entered into with Grosvenor Waterside Investments Ltd which complements the above agreement.  Under this agreement the Assembly has agreed that following any default which results in a sale of the site, the Assembly shall pay to Grosvenor Waterside the balance of any proceeds of sale which remain after first discharging WMC’s liabilities to its Leasing Bank and the various Public Sector Funders (including repayment of the Assembly’s own grant).  Again this liability is confined to funds realised on a sale of the site, and would have no impact on the Assembly’s wider resources.

This statement sets out the contingent liabilities as promised on January 22nd.  It is a technical matter which is now concluded,  but I am happy to take questions.