The English national stadium project at Wembley
REPORT BY THE COMPTROLLER AND AUDITOR GENERAL
HC 699 Session 2002-2003: 6 June 2003
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The English national stadium project at Wembley
REPORT BY THE COMPTROLLER AND AUDITOR GENERAL
HC 699 Session 2002-2003: 6 June 2003
LONDON: The Stationery Office
£9.25
Ordered by the
House of Commons
to be printed on 3 June 2003
This report has been prepared under Section 6 of the
National Audit Act 1983 for presentation to the House
of Commons in accordance with Section 9 of the Act.
John Bourn
National Audit Office
Comptroller and Auditor General
28 May 2003
The National Audit Office study team consisted of:
Laura Brackwell, Andrew Denney and
Keith Hawkswell
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web site at www.nao.gov.uk
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THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
Contents
Executive summary
1
Part 1
Introduction
11
The English national stadium project at Wembley
began in 1996
11
The project did not run smoothly
11
A large number of bodies are involved in
the project
11
This report focuses on the public money that is
being contributed to the project
12
In December 2001 the Secretary of State
announced that further support for the Wembley
project would be conditional
22
In reaching its decision on whether to provide
further support, the Department took appropriate
steps to satisfy itself that the project could be
a success
23
The Department decided not to require Wembley
National Stadium Limited to re-tender the
construction contract
25
The Department took account of the risks that the
project will face as it moves forward
26
Part 4
The protections for the public money
now invested in the Wembley project
Part 2
29
15
The Department and Sport England are providing
18.5 per cent of the funding for the project
29
Sport England had given a lottery grant of
£120 million to the project
15
The public sector funders have secured protections
to safeguard the public interest in the project
30
The lottery funding had been provided in return
for a range of public benefits
15
33
The position on whether the new stadium would
accommodate athletics had changed
16
The Department and Sport England spent
£1.6 million on consultancy, financial and legal
advice about the project
Had the project not proceeded, Sport England
would have been entitled to recover its
lottery grant but this would not necessarily
have been straightforward
17
The position in 2001
Part 3
The decision to provide further
support for the Wembley project
Appendices
1. Key players in the English national
stadium project
34
2. Our approach to the study
38
21
In June 2001 the Department commissioned a
review of the project
21
In November 2001 the Department became
aware of concerns about aspects of the
management of the project
22
Images reproduced with the kind permission of Wembley National Stadium Limited, the Football Association and GMJ Design Limited.
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
executive
summary
1
The history of the project
1
The need for additional
4
public money and the
associated review process
Looking ahead
6
The Comptroller and
Auditor General's
conclusions
9
1
This report is about the handling of the public money that is being contributed
to the project to build a new English national stadium at Wembley. Key facts
about the project are shown in Figure 1.
Key facts about the English national stadium project at Wembley
!
The stadium will be used primarily for football and rugby league but will also, after
adaptation, be capable of hosting major international athletics events.
!
The project is expected to cost £757 million and is scheduled for completion early
in 2006.
!
The Football Association is contributing £148 million to the project and
commercial lenders have provided debt facilities of £433 million.
!
The public sector funders are providing £161 million (£120 million of lottery
money from Sport England, £20 million from the Department for Culture, Media
and Sport and £21 million from the London Development Agency) to the project.
!
The stadium will be owned and operated by Wembley National Stadium Limited,
a wholly owned subsidiary of the Football Association.
!
Profits from the operation of the stadium will be used by the Football Association in
accordance with its objects for the benefit of football.
!
Starting five years after the stadium opens, Wembley National Stadium Limited will
donate one per cent of its turnover each year for distribution to sports education
and other projects.
Source: National Audit Office
2
As the project is being undertaken by a private sector organisation and largely
financed by private capital, this report is not a detailed examination of the
management or value for money of the project as a whole. Rather it focuses on
how the Department for Culture, Media and Sport (the Department) and Sport
England sought to safeguard their investment of public money in the project
and ensure that the stadium as a whole and the other intended public benefits
would be delivered.
The history of the project
3
Following the creation of the National Lottery in 1994, Sport England (then the
Sports Council for Great Britain) faced the prospect of applications from a
number of English cities for lottery funding for major new stadiums. Sport England
decided to establish a national stadium competition, with the objective of
developing an iconic stadium for three sports - football, rugby league and
athletics. As required by the arrangements that apply to lottery grants, the project
would be financed by a mix of lottery money and 'partnership funding' from
other sources. Any profits generated by the stadium would go to benefit sport.
executive summary
In this section
1
executive summary
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
2
4
In December 1996 Sport England selected Wembley as the preferred site for the
new stadium. In November 1998 it awarded the project lottery funding of
£120 million, the bulk of which was used to fund the acquisition of the existing
Wembley stadium and business in March 1999. The grant was subject to a
lottery funding agreement, which set out the conditions under which the
money was provided and the public benefits which the project was expected
to deliver. For example, Wembley National Stadium Limited would have to
make a minimum number of seats available to the general public and would
not be allowed to sell naming rights to the stadium or take on an anchor tenant
who would use the stadium as its home ground.
5
When Wembley National Stadium Limited was unable in December 2000 to
raise the commercial financing it needed, there was the possibility that the project
would not proceed. In that event, Sport England would have been entitled to
recover in full the lottery grant of £120 million it had paid to Wembley National
Stadium Limited. Sport England had put in place a number of mechanisms
intended to safeguard the public money that had been invested in the project, but
recovering the grant in full might not have proved straightforward.
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
!
!
Wembley National Stadium Limited had limited funds of its own from which
to repay the money and the Football Association had not provided a parent
company guarantee which would have effectively underwritten the grant as, at
the time that the grant was made, the Football Association considered that it
was unlikely to have sufficient resources to be able to honour a guarantee.
Sport England had a legal charge over the assets that had been acquired with
the lottery funding and could have forced Wembley National Stadium Limited
to sell them. But, once the existing stadium and business closed in
October 2000, the value of the assets fell and they might have been worth
significantly less than the grant.
Under a staging agreement (which was one element of the arrangements
designed to safeguard the lottery grant), Sport England could have required
the Football Association to hold its events at the existing Wembley stadium
for 20 years and obtained repayment of the grant from the income generated
by these matches. However, closure of the stadium in October 2000
threatened to undermine the business plan underpinning the security of the
lottery grant. Sport England therefore secured additional commitments from
Wembley National Stadium Limited and the Football Association to hold
events at a reinstated Wembley stadium. However, Sport England would not
necessarily have enforced this had the project not proceeded, and the longer
the stadium remained closed, the less likely it was to be re-opened, not least
given the expenditure Wembley National Stadium Limited would have had
to incur to put the stadium in a serviceable condition. Nevertheless Sport
England considered that the staging agreement, together with the additional
commitments agreed when the stadium closed, would have provided it with
a legal basis to secure an alternative deal with Wembley National Stadium
Limited and the Football Association to repay the grant in the event that the
project did not proceed.
executive summary
!
3
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
6
Sport England had provided lottery funding on the basis that the stadium would
be capable of hosting major international athletics events via the installation of
a temporary platform on which a track would be laid. However, in the light of
concerns about the viability of the proposed design, in December 1999 the
then Secretary of State for Culture, Media and Sport announced that athletics
would be withdrawn from the plans for the new stadium and that in return the
Football Association proposed that £20 million of the lottery grant should be
repaid to Sport England. Although Sport England had not been party to all the
key discussions, the formal decision to remove athletics rested with its Council
once the detailed arrangements had been worked out with Wembley National
Stadium Limited.
7
In December 2000 the Council of Sport England agreed to the request Wembley
National Stadium Limited had made to amend the lottery funding agreement to
remove athletics. The £20 million was to be repaid in instalments over a five year
period beginning in December 2000. However, the first repayment date passed
with no money being returned to Sport England as Wembley National Stadium
Limited had not signed the revised lottery funding agreement: by this time the
Football Association was reviewing the project as a whole, having been unable
to secure the commercial financing needed. In the event athletics was restored
to the plans for the stadium later in the project (when the Department concluded
that improvements in the method of construction meant that the platform
solution would be technically acceptable and cost-effective) and the proposal
for £20 million to be repaid was superseded.
executive summary
The need for additional public money and the
associated review process
4
8
In June 2001, in the light of the Football Association's request for further public
funding for the project, the Secretary of State commissioned Mr Patrick Carter
to examine whether the project could be funded and managed at Wembley. In
his interim report in December 2001, Mr Carter advised the Department that,
subject to resolution of some outstanding issues, there was the prospect of
delivering a national stadium at Wembley. But for the project to succeed,
Mr Carter considered that the Government and Sport England had to be seen
to support the project both in principle and in terms of a financial commitment.
9
In November 2001, shortly before Mr Carter reported, the Department became
aware of concerns about aspects of the management and oversight of the
project by Wembley National Stadium Limited, in particular in relation to the
procurement process for the main contract to build the stadium. Wembley
National Stadium Limited commissioned Mr David James CBE to look into the
matter. His investigation found no evidence of criminal intent or impropriety.
But it did confirm the existence of serious concerns relating to the tendering
process and the resulting contractual arrangements.
10
In the light of the concerns, in December 2001 the Secretary of State
announced that any further financial support for the project would be
conditional on the Football Association and Wembley National Stadium
Limited addressing four tests (see Figure 6 on page 23). In September 2002 the
Department concluded that the tests had been met and the project was worthy
of further support. The Department committed £20 million of government
funding to the project for non-stadium infrastructure costs and made it clear
that it would provide no further financial support for the project in the future.
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
In reaching its decision on whether to provide further public funding for the
project, the Department took account of Mr Carter's review of the project,
which incorporated an assessment of whether the Secretary of State's tests had
been met. During the review process which lasted 15 months in total, the
Department, working closely with Sport England, also took assurance from the
Office of Government Commerce's review of the project and from other
external experts (including quantity surveyors and project management
consultants) to inform its judgement on whether:
!
12
the project was deliverable (ie the stadium could be built on time and
within budget) and viable (ie the stadium could operate profitably once it
had been completed);
!
the stadium would be suitable for staging athletics;
!
the project would comply with public sector standards of doing business.
A key decision for the Department was whether, in the light of the concerns
about the procurement process confirmed by Mr James, any further support it
provided for the project should be conditional on Wembley National Stadium
Limited re-tendering the main contract for the construction of the new stadium.
In the light of advice received from Mr James, together with assurance gained
during the review process, the Department decided not to require re-tendering,
which it concluded would lead to no financial benefit for the public sector and
to delay and increased risk for the project.
executive summary
11
5
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
13
In taking the decision to provide additional public funding, the Department
took account of the risks that the project would face which had been identified
during the review process, and assessed the mechanisms that had been put in
place to address these risks.
!
!
14
One area that the Department had to consider was that building the
stadium might take longer or cost more than expected, potentially leading
to a funding gap. To address this risk, the main contractor, Multiplex, has
incentives to deliver on time and within budget, and work to review the
construction contract concluded that most of the circumstances in which
Multiplex would be entitled to claim extra costs or time lay within Wembley
National Stadium Limited's control. In the event that it fails to deliver as
planned, Multiplex has a performance bond in place to fund completion of
the stadium and Wembley National Stadium Limited will retain part of the
fee due to Multiplex until completion has been certified. There is also a
contingency provision to cover unanticipated costs.
Another area that the Department considered was that the revenue
generated by the stadium might fall short of projections, undermining the
project's viability and Wembley National Stadium Limited's ability to meet
its repayments to the bank. To address this risk, responsibility for selling the
premium seats (on which the financial success of the project predominantly
relies) has been contracted to IMG, which will have incentives to maximise
returns. Part of the revenue expected to be generated by advance sales of
premium seats is underwritten in the event that there is a significant
shortfall. The Football Association has provided Wembley National Stadium
Limited with an annual income guarantee, which includes a commitment
to stage its flagship events at the stadium.
The Department concluded that successful delivery of the project would be
heavily dependent on Wembley National Stadium Limited having a strong
executive team to manage the project and effective corporate governance to
oversee the executive management. The public sector funders have established
arrangements to allow them to monitor the progress of the project and to
provide them with assurance about the use of the public money involved. The
Football Association and Wembley National Stadium Limited have agreed to
the continuing involvement of the Office of Government Commerce as the
project proceeds.
executive summary
Looking ahead
6
15
In addition to Sport England's lottery grant of £120 million and the
Department's contribution of £20 million of taxpayers' money, the London
Development Agency is providing funding of £21 million in recognition of the
importance of the project to the overall regeneration of the Wembley area. This
brings the total public sector contribution to £161 million, 21 per cent of the
total funding for the project.
16
In many respects the interests of the public sector funders coincide with those
of Wembley National Stadium Limited and the commercial investors in that
their protection ultimately depends on the delivery of a viable stadium. If the
project is successful, the provision of public money will have made possible the
delivery of a new national stadium for football, rugby league and athletics. The
stadium will be suitable for holding flagship events, make available a specified
minimum number of seats to the general public, and be financially viable in its
own right without the need for ongoing public subsidy.
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
17
Wembley National Stadium Limited's financial projections show that in certain
circumstances the new stadium could generate substantial profits. There is also
the prospect of Wembley National Stadium Limited being able to pay increased
returns to the Football Association as a result of refinancing (ie negotiating
improved financing terms) once construction of the stadium has been
completed and the associated risk eliminated. There is no scope for the
Department or Sport England to share directly in any financial gains generated
by the project or to be involved in decisions about how such gains should be
used. The gains will used by the Football Association in accordance with its
objects for the benefit of football.
18
The Department engaged Partnerships UK to take the lead on the public sector
funders' behalf in the negotiations about the contractual arrangements for the
project. During the negotiations the public sector funders had at times to
balance protecting the public interest with allowing a deal that would be
acceptable to the commercial investors. The public sector funders accepted that
their interests would be largely subordinated to those of the senior bank since
it was providing over half the funding for the project, compared with their
21 per cent. But in some areas where they saw particular risks to the public
interest in the project, the public sector funders secured specific protections.
!
!
The public sector funders were concerned to protect the public interest by
preventing the Football Association from appearing to profiteer, or
destabilising the project, by taking windfall gains. This could leave the
Football Association with no long-term capital commitment to the project
and increase the risk of Wembley National Stadium Limited being left with
insufficient funds to sustain the project. The public sector funders secured a
number of protections to address this risk, including requiring the Football
Association to retain an investment of at least £100 million in the project
throughout the stadium's expected life of 50 years.
The public sector funders also secured a range of contractual provisions to
protect the public interest in the event of Wembley National Stadium
Limited breaching the funding conditions. The rights of the public sector
funders depend on the nature and timing of the breach concerned and, for
the benefit of the project, in some situations Wembley National Stadium
Limited has to be given time to remedy the breach. In certain circumstances
though, the public sector funders have the right to withhold outstanding
funding or to recover funds that have already been paid.
In the event of the project getting into serious financial difficulty and
Wembley National Stadium Limited being unable to meet its agreed
repayments, the senior bank could demand immediate repayment of its
loan in full. A plan for recovery of the project may be proposed by
Wembley National Stadium Limited, on which the public sector funders
would have to be consulted. Ultimately, however, the bank would have
discretion whether to accept the plan or take control of the project itself to
maximise its chances of recovering its investment. The options open to the
bank could have a variety of implications for the public sector funders in
terms of the likelihood of their recovering their grants or securing the
intended public benefits from the project.
executive summary
!
7
executive summary
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
8
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
The Comptroller and
Auditor General's conclusions
The Comptroller and Auditor General's conclusions on the project are as follows.
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The early funding difficulties of the English national stadium project, combined with concerns about propriety, were
a catalyst prompting the Department to reappraise the project and its viability. In taking the decision to provide
additional public funds, the Department, working closely with Sport England, put the project through a thorough
review process, in what is an example of well managed risk taking.
The project is complex, not least because of the number of both public and private sector organisations involved.
Before committing further public money, the Department made sure that the accountabilities and responsibilities of
the public bodies involved in the project were clear.
Looking back, the temporary removal of athletics from the plans for the stadium was not handled well. The
involvement of the Department in the decision that athletics should be withdrawn and that £20 million of the lottery
funding should be repaid did not comply with the proper processes that were in place for handling lottery money.
Had the project not proceeded, there is a risk that the original £120 million of lottery funding would not have been
recovered in full. The Football Association had not underwritten the grant with a formal guarantee so Sport England
would have relied on the staging agreement and the additional commitments secured when the stadium closed as
the basis for a deal with the Football Association and Wembley National Stadium Limited. Since it was uncertain
that the existing stadium would re-open once it had closed, it is unclear how effective these arrangements would
have been in enabling recovery of the grant.
Looking forward, the public sector funders have largely subordinated their interests to those of the senior bank,
reflecting the commercial reality of a deal where the bank is providing the majority of the funding for the project.
In the worst case, the bank would have first call on the project's assets in the event of the project getting into serious
financial difficulty.
For other circumstances, the public sector funders have secured contractual provisions which protect the public
interest. The provisions are proportionate in that they vary according to the seriousness of the funding condition
breached and, except in the most extreme circumstances, should be enforceable without compromising the viability
of the project.
The project monitoring arrangements put in place by the public sector funders should ensure that they stay in close
touch with the progress of the project and that they become aware of any difficulties that arise early on. Ultimately
protection of the public sector investment, represented by both lottery funds and taxpayer's money, will depend on
the project as a whole being a success.
While the principal aim of the project is to deliver a new national stadium the public sector funders are expecting
other benefits. The loss or diminution of any of these benefits (for example, any further reduction in the minimum
number of public access seats, the sale of naming rights or the relaxation of the conditions relating to anchor
tenancy) in the event of financial difficulty would amount to further public support but without involving additional
public funding.
In the event that the project is financially successful, any profits will be used for the benefit of football, in ways to
be decided by the Football Association. There is no scope for the public sector to share directly in any financial
benefits generated by the project or to be involved in deciding how the funds should be used.
executive summary
19
9
part one
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
10
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
1.1 In September 2002 bulldozers moved onto the site of
Wembley stadium in north-west London, marking the
start of the rebuilding of one of British sport's most
enduring icons. Originally constructed as the
centrepiece of the 1924 Empire Exhibition, the stadium
was the venue for numerous major sporting occasions
including the Football World Cup Final in 1966,
Football Association Cup Finals and Rugby League
Challenge Cup Finals. It also hosted track and field
athletics when the Olympic Games were held in
London in 1948.
The English national stadium
project at Wembley began in 1996
1.2 With the creation of the National Lottery in 1994, the
funding available for sport (one of the 'good causes'
which benefits from lottery proceeds) increased
significantly. Sport England (then the Sports Council for
Great Britain) was designated to distribute lottery money
to sport in England. Faced with the prospect of
applications from a number of English cities for lottery
funding for major new stadiums, Sport England decided
to establish a national stadium competition and in
December 1996 Wembley was chosen as the preferred
site for the new stadium.
1.3 The objective of the project was to develop an iconic
stadium for football and rugby league which also had
the capability to stage athletics, thereby enhancing the
nation's sporting infrastructure. The requirement for a
multiple use stadium was challenging in design terms
but was driven by concerns that large athletics stadiums
were not in themselves financially sustainable.
Combining occasional athletics use with regular football
and rugby league fixtures offered the prospect of a
stadium that could be economically viable in its own
right without the need for ongoing public funding. As
required by the arrangements that apply to lottery
grants, the project to develop the stadium would be
financed by a mix of lottery money and 'partnership
funding' from other sources. Any profits generated by
the stadium would go to benefit sport.
The project did not run smoothly
1.4 Figure 2 overleaf sets out key events in the history of the
project. All in all the project did not run smoothly,
culminating in a failure in December 2000 to secure the
commercial financing needed. In April 2001 the
Football Association (see Figure 3 overleaf) decided that
it could not take the project forward on its own and that
it needed other stakeholders to become involved. It
therefore wrote to the Secretary of State for Culture,
Media and Sport to request government support and
financial assistance to supplement the lottery grant that
Sport England had already provided. In September
2002, after a 15 month review process, the Secretary of
State and the Football Association announced that the
project would proceed, with additional public funding
of £41 million - £20 million from the Department for
Culture, Media and Sport (the Department) towards
non-stadium infrastructure costs, together with
£21 million from the London Development Agency.
1.5 When lottery funding was awarded in 1998, it was
envisaged that the project would be completed in 2002
and would cost £320 million, of which the public sector
was to provide £120 million (37 per cent) in the form of
the lottery grant from Sport England. But the problems
on the project led to delays and cost escalations and the
project is now expected to be completed in 2006 and to
cost £757 million, of which the public sector is to
provide £161 million (21 per cent).
A large number of bodies are
involved in the project
1.6 There are a large number of bodies involved in the
project from both the public and private sectors.
Figure 3 overleaf sets out the key players from the
perspective of this report and Appendix 1 provides a
more detailed list. The project is a private enterprise, led
by the Football Association, and the bulk of the
financing is coming from commercial investors. But the
project is intended also to provide public benefits and is
receiving money from three public sector funders.
part one
Part 1
Introduction
11
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
2
Key events in the history of the project
December 1996
Sport England
selects Wembley as
the preferred site for
the new English
national stadium.
1997
March 1999
Wembley National
Stadium Limited
purchases the existing
Wembley stadium
and business.
1998
1999
November 1998
Sport England awards
lottery funding of
£120 million to the project.
June 2001
The Department for
Culture, Media and
Sport commissions a
review of the project.
2000
2001
April 2001
After being unable
to secure the
commercial funding
needed, the
Football Association
seeks additional
public funding for
the project.
September 2002
The project gets the
go-ahead with total
public funding of
£161 million,
commercial financing is
secured and demolition
of the old stadium begins.
2002
2003
December 2001
The Department for
Culture, Media and
Sport sets
conditions for the
project to meet
before any further
public support will
be provided.
Source: National Audit Office
1.7 The project's complex organisational structure and
multiplicity of players led the Department for Culture,
Media and Sport in May 2002 to commission the Office
of Government Commerce to review the framework of
public accountability for the project. The review was
carried out by Sir Christopher Kelly, former Permanent
Secretary at the Department of Health. He examined the
Accounting Officer responsibilities of the central
government bodies involved (including the extent to
which the responsibilities overlapped or could be shared
with each other or subordinated to the senior bank) and
considered the monitoring and reporting arrangements
needed to protect the Accounting Officers' interests.
1.8 Sir Christopher concluded that, although the stadium was
a private sector project for which responsibility rested
with the Football Association and Wembley National
Stadium Limited, the Accounting Officers had to take
responsibility for ensuring the regularity and propriety of
the money they were providing and that value for money
was obtained. Having said that, he noted that the position
was complicated by a number of factors.
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part one
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12
!
The public funding could not be taken in isolation
and was only likely to represent value for money in
the context of the successful delivery of the project
as a whole.
The Department for Culture, Media and Sport's
responsibility, as the sponsor department, for
overseeing the activities of Sport England.
The level of Parliamentary and public interest and the
difficulty for the Government in laying off the political
risk associated with building a national stadium.
In the light of these complexities, Sir Christopher made
a number of recommendations for the public sector's
project monitoring, which are reflected in the
arrangements that the Department and Sport England
have since put in place (see paragraph 3.25).
This report focuses on the public
money that is being contributed to
the project
1.9 As the project is a private venture (undertaken by a private
sector organisation and largely financed by private capital),
this report is not a detailed examination of the management
or value for money of the project as a whole. Rather it
focuses on the public money that is being contributed to
the project which, while covering only around a fifth of the
project's costs, is nonetheless substantial and more in
absolute terms than was originally intended. It looks at how
the Department for Culture, Media and Sport and Sport
England sought to safeguard their investment in the project
and ensure that the intended public benefits would be
delivered. Specifically this report examines:
!
!
!
the position in 2001 when the project had received
lottery funding from Sport England but had been unable
to secure the commercial financing it needed (Part 2);
how the Department for Culture, Media and Sport
reached a decision on whether to award further
public money to the project (Part 3);
the protections for the public money invested in
the project when it received the go-ahead in
September 2002 (Part 4).
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
1.10 The methods we used in this examination are
described in Appendix 2. Our work was designed to
complement the scrutiny of the House of Commons
The key bodies involved in the project
Public sector bodies
Department for
Culture, Media
and Sport
!
Sets the framework for the distribution of lottery funds in policy and financial directions issued by
the Secretary of State.
!
The Permanent Secretary is the Accounting Officer for the National Lottery Distribution Fund
which receives monies generated by the National Lottery for the good causes and allocates the
money to Sport England and the other distributing bodies.
!
The Permanent Secretary is the Accounting Officer for the annual grant-in-aid paid by the
Department to Sport England.
!
The Permanent Secretary appoints the Chief Executive of Sport England as its Accounting Officer
and advises the Secretary of State on the appointment of Council members.
!
Providing funding of £20 million towards the non-stadium infrastructure costs of the project.
!
A non-departmental public body, working at arm's length from its sponsor, the Department for
Culture, Media and Sport, which provides an annual grant-in-aid.
!
Responsible for distributing National Lottery funds to sport in England within a policy and financial
framework laid down by the Department for Culture, Media and Sport.
!
The governing body (the Council) comprises 16 members, appointed by the Secretary of State.
!
The Council, with the approval of the Secretary of State, appoints the Chief Executive, who is
designated Accounting Officer by the Accounting Officer of the Department for Culture, Media
and Sport.
!
Providing funding of £120 million to the project.
!
Responsible for promoting economic development and regeneration in London.
!
Providing funding of £21 million to the project.
!
The governing body of football in England, responsible for developing the game at all levels.
!
A private sector limited company, constituted as a not-for-profit organisation with all surpluses
spent on the development of football.
!
The ultimate owner of the new stadium and beneficiary of any profits generated by the stadium
through its shareholding in Wembley National Stadium Limited.
!
Contributing £148 million to the project.
!
A private sector limited company, wholly owned by the Football Association except for a 'golden
share' (held by Sport England) designed to protect the public interest.
!
Responsible for constructing and operating the new stadium.
!
Contributing £15 million to the project, generated from operating the old stadium before it closed.
Westdeutsche
Landesbank
!
An investment bank.
!
The senior bank, arranging loans of £426 million for the project.
Multiplex
!
A private construction company.
!
Awarded the construction contract to design and build the new stadium, worth £445 million.
Sport England
(formerly the
Sports Council
for Great Britain)
London Development
Agency
Private sector bodies
Football Association
Wembley National
Stadium Limited
Source: National Audit Office
part one
3
Culture, Media and Sport Committee, which has
reported on aspects of the project on five occasions
since 1998.
13
part two
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
14
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
2.1 This part of the report considers the position that the
Department for Culture, Media and Sport and Sport
England were in when the Football Association sought
further public funding for the project in April 2001.
We examined:
!
!
!
!
the extent of the public money that had been
invested in the project;
the benefits that were expected in return for the
public money;
the position on whether the new stadium would
accommodate athletics;
the likelihood of recovering the public money in the
event that the project did not proceed.
Sport England had given a lottery
grant of £120 million to the project
2.2 In November 1998 Sport England awarded lottery
funding totalling £120 million to Wembley National
Stadium Limited in support of the English national
stadium project. The grant was subject to a 'lottery
funding agreement' between Sport England, Wembley
National Stadium Limited and the Football Association,
which set out the conditions under which the money
was provided.
2.3 The lottery grant comprised two elements - £106 million
to fund the acquisition of the existing Wembley stadium
and business (covering the purchase price of
£103 million plus stamp duty of £3 million) and
£14 million to contribute to project development and
design work. The bulk of the grant was paid in
March 1999, when Wembley National Stadium Limited
purchased the stadium and business from Wembley plc,
and all the money had been drawn down by July 2000.
2.4 The grant represented an exceptionally large call on
Sport England's lottery funds (it is the largest lottery
grant it has ever made) and was also unusual in that it
was paid to a private sector company. In contrast with
most other capital projects funded by the National
Lottery, the grant was paid in full before any other
funding had been secured. Grant recipients are usually
required to raise 'partnership funding' from other
sources to cover a certain proportion of project costs as
they are incurred, but Sport England considered that it
would not have been possible for Wembley National
Stadium Limited to secure commercial financing for the
project before acquiring the site and obtaining planning
permission. Unlike most lottery capital projects where
the payment of elements of the grant is dependent on
the achievement of specified milestones, the funding to
Wembley National Stadium Limited was paid in full at
the outset of the project. However, Sport England would
have been entitled to recover its grant if Wembley
National Stadium Limited failed to meet the milestones
set out in the lottery funding agreement.
The lottery funding had been
provided in return for a range of
public benefits
2.5 The primary aim of the grant was to achieve the
development of a new national stadium, although the
lottery funding agreement set out other public benefits
which Wembley National Stadium Limited was
expected to deliver in return for the grant. The benefits
covered matters ranging from the specifications for the
playing area to the number of television and radio
commentary positions. Figure 4 overleaf gives examples
of the key benefits required in return for lottery funding.
part two
Part 2
The position in 2001
15
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
4
Examples of the key public benefits required in return
for lottery funding
The stadium shall have a minimum seating capacity of
80,000 seats for football and rugby league and 65,000 seats
for track and field athletics. Of the seating capacity,
a minimum of 75,000 (now 71,200) seats or in the case of
athletics events a minimum of 60,000 (now 50,000) shall
be available to the general public.
The specified 'flagship events' (such as the Football
Association Cup Final and the Rugby League Challenge
Cup Final) shall be given priority access to the stadium over
all other events, and sporting events in general shall be
given priority access over non-sporting events, such as
concerts and conferences.
The name of the stadium shall be the English National
Stadium (subsequently amended to Wembley National
Stadium) and any change shall require the prior written
approval of Sport England. The granting of naming rights in
relation to any part of the seating area of the stadium shall
require the prior written agreement of Sport England.
The national stadium shall not, without the prior written
consent of Sport England, have an anchor tenant which has
a right to stage its regular home fixtures at the stadium.
Starting five years after the stadium opens, Wembley
National Stadium Limited shall donate one per cent of its
turnover each year to Wembley National Stadium Trust, an
independent charity which will distribute the money to
sports education and other projects. Until that time,
Wembley National Stadium Limited will make a donation
of £5,000 a year to Wembley National Stadium Trust.
Source: National Audit Office analysis of the lottery funding agreement
and associated documentation
The position on whether the new
stadium would accommodate
athletics had changed
part two
2.6 Lottery funding for the project was provided on the basis
that, while the stadium would primarily be used for
football and rugby league, it would also be capable of
hosting major international athletics events, such as the
Olympic Games and the World Athletics
Championships. The stadium would be converted for
athletics use by the installation of a temporary platform
on which a track would be laid, with a consequent
reduction in seating capacity. However, concerns about
the platform solution led the Department in
October 1999 to request a review of the technical merits
of the proposed design.
16
1
2.7 In the light of the review, on 1 December 1999 the then
Secretary of State for Culture, Media and Sport told the
House of Commons that there were doubts about the
viability of the proposed design for international
athletics events. He noted, for example, that the time it
would take to construct and remove the temporary
platform could mean that the stadium would be
unavailable for international standard football for more
than two years. And the British Olympic Association had
raised concerns that, at an increased seating capacity of
80,000 for an Olympic Games, the sightlines for a
significant number of spectators would be
unacceptable. On 22 December 1999 the Secretary of
State announced that, subject to the satisfactory
conclusion of further detailed discussions among the
interested parties, athletics would be withdrawn from
the plans for the new stadium and that in return the
Football Association proposed that £20 million of the
lottery funding should be repaid to Sport England. At
that stage the Government intended to seek an
alternative venue for athletics events.
2.8 In January 2000 the Secretary of State confirmed the
position in letters to Sport England and the Football
Association, and Sport England was tasked with resolving
the detailed arrangements for the repayment of grant.
Discussions about the repayment continued between
Sport England and the Football Association until
September 2000 when Wembley National Stadium
Limited re-submitted its grant application to ask for the
lottery funding agreement to be amended to remove
athletics. Subject to the signing of a revised funding
agreement, the £20 million would be repaid in instalments
over a five year period beginning in December 20001.
2.9 In December 2000 the Council of Sport England agreed
to Wembley National Stadium Limited's request to
amend the lottery funding agreement to remove the
obligation to host athletics at the new stadium. The
Council's decision was taken on the basis that,
following consultation with key parties and taking into
account the stated views of the Secretary of State since
December 1999, there was no longer evident demand
for athletics events to be staged at the stadium.
2.10 However, the first repayment date (December 2000)
passed with no money being returned to Sport England
as Wembley National Stadium Limited had not signed
the revised lottery funding agreement: by this time the
Football Association was reviewing the project as a
whole, having been unable to secure the commercial
financing needed. The question of the repayment was
subsequently overtaken when provision for athletics was
restored to plans for the stadium later in the project
(see paragraph 3.14).
The grant would be repaid as follows: £3 million in December 2000, £3 million in December 2001, £3 million in December 2002, £5 million in
December 2003 and £6 million in December 2004.
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
Key features of the temporary removal of athletics
from the plans for the stadium
!
Under lottery legislation, the Department has no role in
decisions about individual lottery projects.
!
There was no contractual basis for the proposed
grant repayment since the lottery funding agreement
had not been breached and it prohibited the voluntary
repayment of the grant. In the light of the Secretary of
State's announcement of the agreement in principle to
remove athletics, Wembley National Stadium Limited
agreed to apply for the lottery funding agreement to be
amended accordingly.
!
Although Sport England had not been party to all the
key discussions in December 1999, the formal decision
to remove athletics rested with its Council. The decision
was taken in December 2000, a year after the Secretary
of State's announcement.
!
The agreed repayment figure of £20 million was
negotiated with the Football Association and not related
to the cost of providing for athletics within the stadium.
Source: National Audit Office
2.11 The temporary removal of athletics from the plans for
the new stadium and the proposed repayment of part of
the lottery grant was a controversial event in the history
of the project. Key features of the episode are set
out in Figure 5.
Had the project not proceeded,
Sport England would have been
entitled to recover its lottery grant
but this would not necessarily
have been straightforward
2.12 When Wembley National Stadium Limited was unable to
secure the commercial financing it needed, there was the
possibility that the project would not proceed. In that
event, Sport England would have been entitled under the
lottery funding agreement to recover in full the grant of
£120 million it had paid to Wembley National Stadium
Limited. During the process of assessing the grant
application and deciding on the funding conditions, Sport
England had put in place a number of mechanisms
intended to safeguard the public money that had been
invested in the project. In the event the security package
was not tested but recovering the grant in full would not
necessarily have proved straightforward.
Sport England could have asked for its
money back but Wembley National Stadium
Limited had limited funds available
2.13 Wembley National Stadium Limited was set up by the
Football Association as a private limited company,
specifically to build and operate the new stadium. As
such Wembley National Stadium Limited had limited
liquid assets of its own beyond the revenue generated by
the stadium business it had acquired with the lottery
funds. It was unlikely therefore to be in a position to repay
the lottery grant to Sport England from its own funds.
2.14 Recognising Wembley National Stadium Limited's
limited resources, during the course of the negotiations
about the lottery funding agreement, Sport England had
initially sought to protect its investment by securing a
'parent company guarantee' from the Football
Association to Wembley National Stadium Limited. This
would have meant the Football Association effectively
underwriting the lottery grant.
2.15 However, the Football Association considered that a
parent company guarantee would not be meaningful
since, without a profitable stadium, it would be unlikely
to be able to honour a guarantee in practice.
Furthermore the Football Association felt that a
guarantee would undermine the arm's length
relationship that it had developed with Wembley
National Stadium Limited. In the end Sport England
decided not to pursue the question of the guarantee,
concluding that the other elements of security, which
Wembley National Stadium Limited was to provide,
would be adequate to protect the grant.
Sport England could have forced Wembley
National Stadium Limited to sell the site but
it might now have been worth less than the
lottery grant
2.16 As a condition of funding, Sport England secured a legal
charge over the assets acquired with the lottery grant.
This meant that it was in a position to seek to recover the
money it was owed by forcing Wembley National
Stadium Limited to sell the site.
2.17 Wembley National Stadium Limited paid a purchase
price of £103 million for the existing Wembley stadium
and business. This represented the value of the physical
assets and also took account of the value of the income
expected to be generated by the events which were
contracted to the stadium until 2002.
part two
5
17
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
2.18 Before providing the lottery funds to enable Wembley
National Stadium Limited to buy the existing stadium
and business, Sport England confirmed that the agreed
price of £103 million was fair and reasonable.
!
!
part two
In support of its application for lottery funding,
Wembley National Stadium Limited commissioned
Coopers and Lybrand (a predecessor firm to
PricewaterhouseCoopers LLP) to review the freehold
interest and business assets associated with operating
the stadium and provide an opinion on the price that
had been agreed. Based upon the information
available to it and subject to specified limitations,
PricewaterhouseCoopers concluded that as at
24 December 1998 the price agreed for the existing
stadium business, as a going concern, was within a
range of reasonable market values and could
therefore be considered to be fair and reasonable.
2.20 With the aim of preserving the value of the business
acquired, Sport England required the Football
Association to enter into a 'staging agreement' with
Wembley National Stadium Limited. Sport England was
also a party to the agreement, which could not be
changed without its consent. The agreement obliged the
Football Association to stage its flagship events
(including the Football Association Cup Final and
England's international football matches) at Wembley
stadium for a period of 20 years, thereby providing
Wembley National Stadium Limited with a revenue
stream. The financial arrangements within the
agreement provided revenue based upon a proportion
of ticket sales, a percentage of sponsorship and
television income, and a shortfall guarantee to ensure a
minimum income from the Football Association to
Wembley National Stadium Limited.
Sport England sought advice from Grant Thornton (a
firm of chartered accountants), including a review of
PricewaterhouseCoopers' valuation report on the
existing stadium and business. In its report in
January 1999, Grant Thornton supported the
conclusions of the valuation opinion in that the
price was within the range of market values although
at the upper end. Grant Thornton also considered
that the processes and techniques that had been
used to value the existing stadium business were
appropriate in the circumstances.
2.21 As well as underpinning the financial viability of the
new stadium once it opened, the agreement was
designed to provide a mechanism for protecting the
lottery grant. In the event that the project did not
proceed, the staging agreement provided for Sport
England to require the Football Association to hold its
matches at the existing Wembley stadium and to obtain
repayment of the grant from Wembley National Stadium
Limited from the income generated under the terms of
the agreement.
2.19 However, without the value of contracted events, the
stadium and business were worth less than the purchase
price and once the stadium had closed in October 2000
the value of the physical assets acquired with the lottery
grant was possibly as low as £30 million (equivalent to
25 per cent of the lottery grant), although there was not a
formal valuation. Selling the assets might not therefore
have generated sufficient money to enable Wembley
National Stadium Limited to repay the grant in full.
2.22 In support of its application for lottery funding,
Wembley National Stadium Limited was required to
secure an opinion from a bank or financier as to the
ability of the existing stadium to generate funds to effect
a repayment of the grant in the event that the project did
not proceed. In January 1999 Guinness Mahon (an
investment bank) provided an opinion that, on the basis
of the staging agreement, the existing stadium business
could raise £106 million of private capital on or around
31 March 2000 which could finance the repayment of
most of the grant to Sport England. Grant Thornton
advised Sport England that this amount was at the upper
end of achievability but it considered that a
combination of private finance and funds from the
Football Association could allow Wembley National
Stadium Limited to repay the grant.
!
18
Humberts Leisure (a firm of chartered surveyors and
leisure property specialists), acting as valuers for the
vendor, Wembley plc, valued the existing stadium
and related assets at £105.5 million in January 1999.
Sport England could have obliged the
Football Association to stage its events at
the existing Wembley stadium but would
not necessarily have enforced this
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
2.23 However, closure of the stadium in October 2000
threatened to undermine the business plan
underpinning the security of the lottery grant. Sport
England therefore protected the security by securing
additional commitments from Wembley National
Stadium Limited and the Football Association to hold
events at a reinstated Wembley stadium.
2.25 Nevertheless Sport England regarded the staging
agreement as the key mechanism for protecting the
lottery grant. It considered that the agreement together
with the additional commitments agreed when the
stadium closed would have provided it with a legal basis
to secure an alternative deal with Wembley National
Stadium Limited and the Football Association to repay
the grant in the event that the project did not proceed.
part two
2.24 However, despite the provisions of the staging
agreement, Sport England would not necessarily have
compelled the Football Association to stage its matches
at the existing stadium had the project not proceeded.
The longer the stadium remained closed, the less likely
it was to be re-opened, not least given the expenditure
that Wembley National Stadium Limited would have
had to incur to put the stadium in a serviceable
condition (which in December 2001 was estimated as
£40 million). And, even with this expenditure, the
stadium was expected to be fit for use only for five to ten
years and with a reduced capacity.
19
part three
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
20
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
3.1 This part of the report analyses what happened to the
project between the Football Association's approach to
the Government in April 2001 and the announcement in
September 2002 that the project would go ahead with
additional public funding. We examined how the
Department for Culture, Media and Sport reached its
decision that the project was worthy of further support.
In particular we considered:
!
!
!
!
the initial work to review the project;
the concerns that led the Secretary of State to make
a statement about the project in December 2001;
the steps taken by the Department in reaching a
decision on whether to proceed with further support
for the project;
the remaining risks as the project now moves forward.
In June 2001 the Department
commissioned a review of the project
3.2 In June 2001, in the light of the Football Association's
request for further public funding for the project, the
Secretary of State commissioned Mr Patrick Carter2 (a
businessman who had undertaken a variety of work for
the Government, including a review of the financing of
the 2002 Commonwealth Games) to examine whether
the project to develop a new English national stadium
could be funded and managed at Wembley or, if that
proved impractical, at another location in England.
!
!
!
2
the design was conceived as over-ambitious and
contained many non-core elements, whilst at the
same time failing to meet the needs of the premium
seat holders;
the premium seat income (on which the
commercial financing mainly depended) was not
sufficiently secure;
the Government was perceived as interfering in the
project to its detriment and the very public difference
of opinion between the Government and the Football
Association on the question of athletics led to a loss
of confidence on the part of potential lenders.
3.4 Mr Carter regarded the Football Association as the only
realistic and credible sponsor for the national stadium
project and concluded that the final decisions on
location and design therefore rested with the Football
Association. But for the project to succeed, the
Government and Sport England had to be seen to
support the project both in principle and in terms of a
financial commitment. Mr Carter considered that,
together with financing from other sources, a
contribution of £20 million from the Department would
be a sufficient commitment.
3.5 During the course of the review the Football Association
worked to refine its proposals for the project and reduce
uncertainty. In his interim report Mr Carter advised the
Department that, subject to the resolution of some
outstanding issues, there was now the prospect of
delivering a national stadium at Wembley. In his view,
the revised proposals were better than the original plan
in four key respects:
!
3.3 Mr Carter delivered his interim report to the Secretary of
State in December 2001. He identified four main
reasons why the Wembley project had initially failed:
!
the sponsor, Wembley National Stadium Limited,
was not then perceived as credible with key
stakeholders including the financial markets;
!
!
!
Mr Carter was subsequently appointed Chairman of Sport England in December 2002.
the scope of the project had been reduced and more
accurately costed - the plans for a hotel, offices and
a visitor attraction had been removed and better
catering and hospitality services were to be provided
for premium seat holders;
the premium seat income had been market tested
and an offer of underwriting received;
the banking requirement had been significantly
reduced and was more realistic;
the level of non-debt funding had increased,
including a contribution of £100 million from the
Football Association.
part three
Part 3
The decision to provide
further support for the
Wembley project
21
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
In November 2001 the Department
became aware of concerns about
aspects of the management of
the project
3.6 In November 2001, shortly before Mr Carter delivered his
interim report, the Department became aware of concerns
about aspects of the management of the project. The
concerns had first been raised by Tropus Limited, which
provided project management services to Wembley
National Stadium Limited from November 1997 to
August 2001. Tropus was critical about aspects of the
management and oversight of the project by Wembley
National Stadium Limited, in particular in relation to the
procurement process which led to the appointment of
Multiplex as the main contractor to build the new stadium.
3.7 In the light of a report from Tropus, in September 2001
the then Chairman of Wembley National Stadium
Limited asked Mr David James CBE (a company doctor
and a specialist in corporate governance and
insolvency) to investigate the allegations that had been
made. Supported by the law firm, Berwin Leighton
Paisner, Mr James examined the procurement process
and the underlying corporate governance arrangements
at Wembley National Stadium Limited3. Mr James's
investigation was necessarily limited to activities within
the jurisdiction of Wembley National Stadium Limited.
3.8 Wembley National Stadium Limited received Mr James's
and Berwin Leighton Paisner's reports in December 2001
and provided copies to the Department, Sport England,
Mr Carter and the Comptroller and Auditor General.
Mr James reported that the investigation had found
no evidence of criminal intent or impropriety during
the procurement process which led to the appointment
of Multiplex.
part three
3.9 However, in his report, Mr James confirmed the
existence of serious concerns relating to the tendering
process (up to September 2000) and the resulting
contractual arrangements. Specifically there had been a
lack of adequate monitoring and oversight of the project
by the Wembley National Stadium Limited Board as a
whole. There had also been a failure of expected
standards of governance which should have covered
controls to resolve any potential conflicts of interest
which might have arisen in relation to those undertaking
key contract negotiations.
22
!
!
!
failed to determine, adopt and implement a
detailed formal procurement process, including
documentation setting out the timetable, selection
criteria, and weighting checks and controls;
conducted a parallel procurement process (by
running two separate tendering processes on
substantially different terms but for the award of the
same contract), therefore making it difficult to have
a fully competitive process;
had meetings and dialogue with Multiplex prior to
commencing any formal procurement process,
thereby potentially giving Multiplex a potential
competitive advantage over other contractors.
3.11 Overall, the major concern arising from the investigation
was that there had not been a level playing field for all
the parties who had indicated an interest in tendering for
the contract. Mr James concluded that the process by
which the tender had been offered and the contract
negotiated was unlikely to satisfy the best practice
standards usually required in a project involving public
money. He considered that the lack of an audit trail
meant that it was difficult to demonstrate whether the
process had achieved best value and it would never be
possible to assess this with any certainty.
In December 2001 the Secretary of
State announced that further
support for the Wembley project
would be conditional
3.12 After receiving the reports from Mr Carter, Mr James and
Berwin Leighton Paisner, on 19 December 2001 the
Secretary of State announced to the House of Commons
that any further financial support for the Wembley
project would be conditional, and limited to covering
non-stadium infrastructure costs and the Government's
interest in protecting the £120 million of lottery money
already invested in the project.
3.13 In the light of the concerns that Wembley National
Stadium Limited had not adhered to best procurement
practices or corporate governance arrangements, the
Secretary of State set four tests for the Football
Association and Wembley National Stadium Limited to
address before the Government would proceed with
support for the project (Figure 6). The Secretary of State
subsequently asked Mr Carter to incorporate in his work
an assessment of whether the tests had been met.
3.10 Berwin Leighton Paisner's report detailed the specific
concerns that led it to conclude that the procurement
process had fallen short of industry best practice and had
not complied with commercial competitive tendering
processes. Wembley National Stadium Limited had:
3
Mr James did not receive a fee for this work but, in view of his other commitments, suggested he should be supported by an investigation team who would
report directly to him. Wembley National Stadium Limited agreed and Berwin Leighton Paisner was contracted in October 2001.
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
The four tests set by the Secretary of State for
Culture, Media and Sport
!
the project was deliverable and viable;
!
the stadium would be suitable for staging athletics;
1. An independent value for money assessment of the
proposed contracts with Multiplex had to be
commissioned and conducted by an appropriate
company with no previous or likely future involvement
in the project.
!
2. At the Secretary of State's request, Wembley National
Stadium Limited had ensured that papers relating to the
matter were available to the Comptroller and Auditor
General so that he could decide whether to look into the
matter further.4
3. The Government sought confirmation that corporate
governance changes would be made to produce a
management structure capable of delivering a complex
project within procedures acceptable to the public sector.
4. The Government sought confirmation that financial
support was adequate and fully committed, after all
relevant factors had been taken into account in a process
of due diligence.
Assurance that the project was deliverable
and viable
3.16 The Department wanted to be satisfied that the project
was deliverable (ie the stadium could be built within the
timetable and budget that had been specified) and
viable (ie the stadium could operate profitably once it
had been completed) and would not need additional
public funding at a later stage. The Department took
assurance from the following sources.
!
Source: Hansard, 19 December 2001
3.14 In her statement in December 2001, the Secretary of
State also referred to the question of athletics. The plans
to develop an alternative venue for international
athletics events had been dropped and Wembley
National Stadium Limited now believed that
improvements in the method of construction meant that
the platform solution to accommodate athletics at
Wembley could be implemented more cheaply and
without the disruption that would previously have been
involved (see paragraph 2.7). The Secretary of State
announced that Sport England would commission an
evaluation of the new proposals to confirm that they met
the technical criteria of the athletics governing body and
prepare a cost-benefit analysis comparing the proposals
with the previous plans.
!
In reaching its decision on whether
to provide further support, the
Department took appropriate steps
to satisfy itself that the project could
be a success
3.15 In September 2002 the Department decided to commit
an additional £20 million of government funding to the
project to cover non-stadium infrastructure (mainly
transport) costs. In reaching its decision that the project
was worthy of further support, the Department took into
account Mr Carter's final report and advice from a range
of other external experts (Figure 7 overleaf) to satisfy
itself that:
4
5
the project would comply with public sector
standards of doing business.
!
Mr
Carter
continued
with
his
work
(see paragraph 3.2) to examine whether the project
could be adequately financed (the Secretary of
State's fourth test) and was capable of proceeding to
completion. His final report also included an
analysis of the overall viability of the stadium. This
drew on the due diligence work done by Wembley
National Stadium Limited and the banks, in
particular the financial modelling to assess viability
in different scenarios. The key difference between
the scenarios was the assumptions used in respect of
the level of premium seat sales5, which are critical
to the financial success of the project. Mr Carter's
team tested the complex financial model used to
generate cashflow projections and evaluated the
underlying assumptions.
To meet the Secretary of State's first test, in
February 2002 Wembley National Stadium Limited
appointed Cyril Sweett Limited (a firm of quantity
surveyors and construction advisers with no links to
the project) to conduct an independent assessment
of the contract that had been negotiated with
Multiplex to build the stadium, in particular to
review whether the contract price represented value
for money. The Department and Sport England were
consulted about the terms of reference for the
assessment to ensure that it would provide the
assurance that the Secretary of State was seeking.
Cyril Sweett Limited was also subsequently
re-commissioned in May 2002 to assess the impact
on value for money of a change in the structure of
the deal, which removed the financing element from
the contract leaving it as 'design and construct' only.
In March 2002, at the Department's request,
Wembley National Stadium Limited commissioned
the Office of Government Commerce to implement
its gateway review process on the project.
The Comptroller and Auditor General received the relevant papers in December 2001 but concluded that it would not be appropriate for him to examine
the matter while discussions about the project were ongoing. While making it clear that it had no role in the decision making process, the National Audit
Office subsequently pointed the Department to the available guidance on a range of issues including value for money and corporate governance.
The stadium is to have 16,958 premium seats, including 1,856 in boxes.
part three
6
23
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
7
Sources of assurance on the project
Department for Culture,
Media and Sport
Sport England
Wembley National
Stadium Limited
PricewaterhouseCoopers
Provided advice
on corporate
governance at
Wembley National
Stadium Limited.
Citex and Sport
Concepts
Evaluated the
feasability of the
proposed
platform design
solution for
staging athletics
in the stadium.
Whether the project
would comply with
public sector standards
of doing business
Office of
Government
Commerce
Carried out an
OGC gateway
review to assess
whether the
project could be
taken forward
successfully.
Whether the stadium
would be suitable for
staging athletics
London Development
Agency
Cyril Sweett
Limited
Assessed the
proposed contract
with Multiplex to
build the stadium
and whether it
represented value
for money.
Whether the project
was deliverable
Davis Langdon
and Everest
(incorporating
work by Citex for
Sport England)
Reviewed the
delivery risks
associated with
the proposed
construction
contract with
Multiplex.
Patrick Carter:
National Stadium
Review
Reviewed whether
the project could
be funded and
managed at
Wembley and
whether the
Secretary of State's
conditions for
further funding
had been met.
Whether the project
was viable
Whether the project was worthy of further public support
Requested
Commissioned
Provided assurance on
Source: National Audit Office
The gateway process brings important benefits in
that it examines a project at critical points in its
lifecycle to provide assurance that it can progress
successfully to the next stage. The reviews are
carried out by teams of people with relevant
experience and expertise and independent of the
project concerned. The March 2002 review
considered aspects such as contract structure,
communications, and wider infrastructure matters
going beyond the construction of the stadium.
part three
!
24
In January 2002, as part of his work for the
Department, Mr Carter commissioned Davis
Langdon and Everest (a quantity surveying and
project management consultancy) to consider the
extent to which the proposed contract transferred
risk from Wembley National Stadium Limited to the
contractor, Multiplex, and to assess the scope for
the contract price to increase. A second Davis
Langdon and Everest consultant was subsequently
commissioned by the London Development Agency
to review similar issues. And Sport England
requested a review of the contract from its advisers,
project management consultants Citex. In
recognition of the fact that these various pieces of
work were overlapping, in the interests of economy
and consistency, the work was consolidated under
the second Davis Langdon and Everest consultant
who continued to review the contract as it was
modified in the course of the negotiations
about the deal.
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
3.17 In the light of the earlier uncertainty about whether the
proposed stadium was suitable for athletics, as had been
intended when the plans were originally developed and
lottery funding was awarded, the Department wanted
assurance that Wembley National Stadium Limited's
revised proposals for athletics would be technically
acceptable and cost-effective and that the stadium
would deliver the intended public benefits. In line with
the Secretary of State's announcement in
December 2001 (paragraph 3.14), in February 2002
Sport England commissioned Sport Concepts (a sport
and entertainment architecture consultancy) and Citex
to undertake a technical and cost evaluation of the
modified proposals to accommodate athletics in the
stadium. The consultants reviewed whether the
proposals complied with the requirements of the
International Association of Athletics Federations and
with the lottery funding agreement, and whether they
offered a cost-effective solution.
Assurance that the project would comply with
public sector standards of doing business
3.18 To help Wembley National Stadium Limited to meet the
Secretary of State's third test, in February 2002 Sport
England commissioned PricewaterhouseCoopers LLP
(an international accountancy and business services
firm) to provide advice. PricewaterhouseCoopers
reviewed corporate governance processes within
Wembley National Stadium Limited, considered the
public interest issues involved in the project (including
relations between Wembley National Stadium Limited
and the various public sector stakeholders), and
reviewed publicly available information on the
affiliations and directorships of proposed Board
members. In the light of this work and taking account of
best practice in the field, the Department and Sport
England sought and secured improvements in Wembley
National Stadium Limited's corporate governance
arrangements (see paragraph 3.24).
The Department decided not
to require Wembley National
Stadium Limited to re-tender the
construction contract
3.19 A key decision facing the Department was whether, in
the light of the concerns about the procurement process
confirmed by Mr James and Berwin Leighton Paisner
(see paragraphs 3.9 to 3.11), any further support it
provided for the project should be conditional on
Wembley National Stadium Limited re-tendering the
main contract for the construction of the new stadium.
3.20 In his report Mr James concluded that the uncertainty
about whether the contract that had been negotiated with
Multiplex represented best value would normally have
justified re-tendering to ensure compliance with best
practice. However, Mr James accepted Wembley National
Stadium Limited's view that in the circumstances
re-tendering would be unfeasible for practical and
financial reasons. Re-tendering would have been likely to
take at least 12 months, jeopardised the contract prices
that had been negotiated, and put at risk the commitment
of the banks to the project. And it was likely that the delay
in starting the project would mean that seven acres of land
surrounding the stadium would revert to the previous
owner and would no longer be available to Wembley
National Stadium Limited. All in all Wembley National
Stadium Limited felt that re-tendering would lead the
project to collapse. Mr James considered that the choice
was therefore between abandoning the project altogether
or proceeding with the existing contract on the grounds
that it represented better value than any alternative that
was then available. His conclusion was that given the
circumstances best value was more likely to result from
proceeding with the contract.
3.21 As part of its work Cyril Sweett Limited also considered
the question of re-tendering and concluded that, were
the project to be re-tendered, a lower price was possible
but not probable and a number of factors (such as the
cost of re-tendering and the impact of inflation during
the tender period) would substantially erode the
likelihood of a reduction in price. Mr Carter considered
that there was no certainty of savings from re-tendering
and that the costs of the consequent delay could offset
any savings that were secured in the construction and
other prices. Furthermore there was no likelihood of
re-tendering generating any savings for the public purse.
3.22 In the light of the advice received, the Department
concluded that re-tendering the construction contract
would lead to delay and increased risk for the project
(and therefore put at risk the public funding already
invested in it) and would bring no financial benefit for
the public sector. It therefore decided not to require
Wembley National Stadium Limited to re-tender the
contract as a condition of further support.
part three
Assurance that the stadium would be
suitable for staging athletics
25
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
The Department took account of
the risks that the project will face
as it moves forward
3.23 The Department concluded that none of the sources
from which it took assurance raised concerns of
sufficient seriousness as to suggest that the project could
not be successful and was therefore not worthy of
government support on the scale envisaged. In reaching
its decision to proceed, the Department took account of
the risks that the project will face as it moves forward.
During the course of the deal being finalised Wembley
National Stadium Limited and the other bodies involved
in the project sought to put in place mechanisms to
address these risks. Figure 8 assesses the position on the
key risks relating to the deliverability and viability of the
stadium, which will determine the success or failure of
the project as a whole.
3.24 The Department concluded that successful delivery of
the project by Wembley National Stadium Limited
would be heavily dependent on two key factors.
!
!
A strong executive team to manage the project,
including the key relationship with the main
contractor, Multiplex. Of particular importance would
be the creation of a 'no change' culture in order to
minimise the risk of the cost increasing above the
fixed price agreed. The Chairman of Wembley
National Stadium Limited gave assurances to
Mr Carter that, before building work on the new
stadium started, it would make changes to strengthen
the executive team that would manage the project.
In
Spring
2003
new
construction
and
marketing/communications directors were appointed.
Effective corporate governance to oversee the
executive management of the project. In the light of
the problems earlier in the project and the
recommendations made by PricewaterhouseCoopers
(see paragraph 3.18), changes were made to
strengthen Wembley National Stadium Limited's
corporate governance arrangements, bringing
them more into line with the standards that apply
to listed companies.
!
part three
!
26
6
!
!
Wembley National Stadium Limited has
appointed an internal auditor to review the
company's operating systems within a
three-year timetable.
3.25 A variety of arrangements have been or are being put in
place to allow the public sector funders to monitor the
progress of the project and to provide them with
assurance about the use of the public money involved.
!
!
!
!
The Board was reconstituted and a new
Chairman, with experience of the construction
industry, and other new non-executive directors
were appointed.
A committee structure was established to
support the main Board. There are currently eight
committees6, each with explicit terms of
reference and with non-executive directors
among their members.
Board members and senior managers have
completed declarations of interest to indicate
any possible conflicts of interest.
!
The Chief Executive of Wembley National Stadium
Limited has been appointed as a 'compliance officer'
with responsibility for demonstrating that public funds
have been applied appropriately and that public
interest obligations have been met. The compliance
officer is intended to be similar in general terms to the
accounting officer of a public body.
The public sector funders have monitoring
arrangements in place to allow them to hold
Wembley National Stadium Limited to account for
its use of public money and to enable them to
comment and press for changes if they have
concerns about the management of the project.
The public sector funders are meeting Wembley
National Stadium Limited formally on a quarterly
basis to discuss compliance with the funding
agreements and progress on the project more
generally, and there are monthly meetings of
operational staff from both sides.
The public sector funders are currently in the process
of appointing consultants with specialist expertise
who will undertake detailed monitoring of all aspects
of the project, including corporate governance and
business issues as well as construction. In the
meantime Sport England's project monitors, Bucknall
Austin (formerly known as Citex), are providing
monthly reports to supplement those supplied by
Wembley National Stadium Limited.
The Football Association and Wembley National
Stadium Limited have agreed to the continuing
involvement of the Office of Government Commerce
(OGC) as the project proceeds. During the
construction of the stadium there will be further OGC
reviews at key points to provide assurance that the
project can progress successfully to the next stage.
Sport England has a reserve power to appoint three
new directors to the Wembley National Stadium
Limited Board.
The committees cover: construction, corporate governance and audit, finance, health and safety, marketing/commercial, operations, remuneration, and risk.
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
Key risks to the deliverability and viability of the project
Risk
Construction risk building the stadium
takes longer or costs
more than expected,
potentially leading to
a funding gap.
Assessment
!
The construction contract allocates risk between Wembley National Stadium Limited and the main
contractor, Multiplex. The contractor has incentives to deliver on time and within budget.
!
If the stadium is delivered late, Multiplex will be liable to pay damages to Wembley National
Stadium Limited up to a maximum which represents nine months delay, unless the delay is on
grounds that entitle Multiplex to an extension of time.
!
The fixed price for delivering the stadium is £445 million. If Multiplex builds the stadium for less
than this amount, it will keep the difference; if the stadium costs more, Multiplex will bear the
cost except in certain circumstances.
Work to review the contract sought to minimise the risk of design changes and concluded that most
of the circumstances in which Multiplex would be entitled to claim extra costs or time lay within
Wembley National Stadium Limited's control. Examples include Wembley National Stadium Limited
providing instructions late or making design changes. Wembley National Stadium Limited is
committed to seeking to achieve a 'no change' culture for the stadium design.
Operating risk - the
stadium's running costs
are more than expected
or revenue falls short of
projections, undermining
the project's viability and
Wembley National
Stadium Limited's ability
to meet its obligations to
the senior bank.
!
In the event that it fails to deliver as planned, whether through insolvency or another reason,
Multiplex has a performance bond of £60 million in place to fund completion of the stadium.
The bond is underwritten by an insurance company. Wembley National Stadium Limited will also
retain £40 million of the fee due to Multiplex until completion has been certified. The retention
combined with the bond gives Wembley National Stadium Limited up to £100 million of cover in
the event of contractor failure or insolvency.
!
There is a contingency provision of £30 million (£20 million with Wembley National Stadium
Limited and £10 million with Multiplex) to cover unanticipated costs.
!
In the event of the project getting into financial difficulty, Wembley National Stadium Limited could
apply to Sport England for some of the funding conditions, such as those relating to naming rights
and anchor tenancy (see Figure 4 on page 16), to be relaxed. This could provide Wembley National
Stadium Limited with an additional source of revenue.
!
The business case as a whole was tested by the banks as part of their due diligence process and
reviewed by Mr Carter's team, and found to be satisfactory. The financial success of the project relies
predominantly on the sales of premium seats (which are expected to generate around 70 per cent of
income). Responsibility for selling the premium seats has been contracted to IMG (a sports marketing
agency), which will have incentives to maximise returns. In respect of the revenue to be generated
by advance sales of premium seats prior to the completion of the stadium, Credit Suisse First Boston
has provided the senior bank with a letter of credit guaranteeing up to £25 million in the event that
there is a significant shortfall in the income generated.
!
The Football Association has provided Wembley National Stadium Limited with an annual income
guarantee. As part of this, the staging agreement (see paragraph 2.20) guarantees that certain events will
be held at the stadium. Under the agreement, the Football Association will forego all premium seat
income and pay 32 per cent of general admission receipts to Wembley National Stadium Limited.
!
In the event of the project getting into financial difficulty, Wembley National Stadium Limited could
apply to Sport England for some of the funding conditions, such as those relating to naming rights
and anchor tenancy (see Figure 4 on page 16), to be relaxed. This could provide Wembley National
Stadium Limited with an additional source of revenue.
Source: National Audit Office
part three
8
27
part four
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
28
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
4.1 This part of the report considers the position of the
Department for Culture, Media and Sport and Sport
England in relation to the project at financial close of the
deal in September 2002. In particular we examined:
!
!
9
How the project will be funded and what the money
will be used for
Sources of funding
Wembley National
Stadium Limited,
£15m
(2.0%)
the financial structure of the deal, including the
extent of the funding being provided by the
Department and Sport England;
Football
Association,
£148m
(19.5%)
the safeguards in place to protect the public
investment in the project and ensure that the public
benefits are delivered.
The Department and Sport England
are providing 18.5 per cent of the
funding for the project
4.2 Figure 9 sets out how the project will be funded and
what the money will be used for. Over half of the
£757 million is to come from loans from the senior
bank, Westdeutsche Landesbank (known as West LB).
Wembley National Stadium Limited's ability to make
repayments to the bank will be largely dependent on the
revenue streams generated by the stadium, in particular
the income from the sale of the premium seats which is
critical to the success of the project.
4.3 Between them, the Department and Sport England are to
provide 18.5 per cent of the funding for the project. Sport
England has already paid in full its grant of £120 million to
Wembley National Stadium Limited (see paragraph 2.3).
The Department has committed £20 million, which it
expects to start paying from April 2004. The Department's
money is being provided to reimburse Wembley National
Stadium Limited for the costs of specified infrastructure
improvements that needed to be included in the plans for
the project to gain planning permission. It includes
£9 million towards the upgrading of Wembley Park station
and funding for other specified public transport, access
and environmental improvements. The London
Development Agency is providing £21 million in
recognition of the importance of the project to the overall
regeneration of the Wembley area, bringing the total
public sector contribution to 21 per cent of the total
funding for the project.
Department
for Culture,
Media and
Sport, £20m
(2.6%)
London
Development
Agency,
£21m
(2.8%)
Westdeutsche
Landesbank,
£426m
(56.3%)
Credit Suisse
First Boston,
£7m
(0.9%)
Sport
England,
£120m
(15.9%)
Uses of funding
Contingency
provision,
£20m
(2.6%)
Stadium
construction,
£445m
(58.8%)
Infrastructure
costs,
£21m
(2.8%)
Finance
costs,
£79m
(10.4%)
Development
and
management,
costs, £86m
(11.4%)
Site
purchase,
£106m
(14.0%)
Source: National Audit Office analysis of Patrick Carter's final report
part four
Part 4
The protections for the public
money now invested in the
Wembley project
29
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
4.4 A key change from the proposals put forward in 2001
for funding the project is the contribution of
£148 million from the Football Association, which gives
it a significant financial stake in the success of the
project. Although the money is a loan, the Football
Association ranks behind the senior bank and the public
sector funders in terms of recovering its money in the
event that the project is not completed. Furthermore the
Football Association has to provide the bulk of its
investment (£131 million) before the senior debt from
West LB is released and well in advance of the further
public funding from the Department and the London
Development Agency being drawn down. And the
Football Association is required to retain an investment
of at least £100 million in the project for 50 years from
completion of the stadium.
The public sector funders have
secured protections to safeguard
the public interest in the project
4.5 The negotiations about the contractual arrangements for
the project involved Wembley National Stadium Limited
and the Football Association, West LB and the other
commercial investors, and the three public sector
funders - the Department, Sport England and the
London Development Agency. Where they had
common interests the public sector funders negotiated
jointly but each has its own funding agreement with
Wembley National Stadium Limited, as well as being a
party to the overarching inter-creditor agreement.
The Department engaged Partnerships UK to take the
lead in the negotiations on the public sector funders'
behalf and provide advice on negotiating tactics and
wider commercial issues.
part four
4.6 Throughout the discussions about the deal the public
sector funders were concerned to safeguard their
investment and ensure that it would deliver value for
money. In many respects, the interests of the public
sector funders coincide with those of Wembley
National Stadium Limited and the commercial investors
in that their protection ultimately depends on the
delivery of a viable stadium. But in some areas the
public sector funders sought to secure specific
protections where they foresaw particular risks from
their own perspective. In paragraphs 4.7 to 4.20 below,
we set out the protections that the public sector
funders would seek to rely on in the event of three
particular scenarios.
30
Scenario 1: the stadium is highly profitable
4.7 Wembley National Stadium Limited's financial
projections show that in certain circumstances the new
stadium could generate substantial profits for distribution
to the Football Association. There is also the prospect of
Wembley National Stadium Limited making significant
gains from 'refinancing' at a later stage of the project.
4.8 Refinancing is the renegotiation of financing terms
during the course of a project. It is an established
technique on major projects where improved financing
terms may be secured where risks have been
successfully managed. Wembley National Stadium
Limited is expected to have the opportunity to refinance
once the stadium has opened when construction risk
will have been eliminated and there will be more
certainty about the level of premium seat sales.
Refinancing could have significant benefits for Wembley
National Stadium Limited, including lower interest rates
on the outstanding debt (reducing the relatively high
financing costs that will be paid in the early years of the
project) and a longer repayment period. The improved
financing terms could increase the returns available for
distribution to the Football Association.
4.9 Refinancing could offer protection to the public interest
in that it could increase the likelihood of the project
being financially viable. Nevertheless in negotiating the
deal, the public sector funders were concerned also to
safeguard the public interest by preventing the Football
Association from appearing to profiteer, or destabilising
the project, by taking windfall gains, including after
refinancing. This could leave the Football Association
with no long-term capital commitment to the project
and increase the risk of Wembley National Stadium
Limited being left with insufficient funds to sustain the
project. So the public sector funders secured the
following protections.
!
!
The Football Association has to retain an investment
of at least £100 million in the project (unless the
Secretary of State agrees to a lower amount)
throughout the stadium's expected life of 50 years
and can therefore require Wembley National
Stadium Limited to repay only up to £48 million of
its original investment during this period.
The Football Association has to retain a controlling
interest in Wembley National Stadium Limited for
50 years from completion of the stadium and its
ability to sell a minority interest is limited - the sale
of any minority interest earlier than 2018 requires
approval from the Secretary of State and between
2018 and 2022 the Football Association can sell
only up to 15 per cent without approval.
THE ENGLISH NATIONAL STADIUM PROJECT AT WEMBLEY
!
!
In the event of refinancing, there are restrictions on
the ability of the Football Association to enter into
any contracts or relationships with Wembley
National Stadium Limited on terms which effectively
allow the Football Association to take money out of
the project. An example could be the Football
Association taking a disproportionate share of the
income from a joint Football Association/Wembley
National Stadium Limited marketing deal involving
sponsorship of the Football Association Cup Final by
a drinks manufacturer which also has the rights to
sell drinks within the national stadium.
Wembley National Stadium Limited must prepare its
accounts in accordance with United Kingdom
generally accepted accounting practice and
specifically it must ensure that its accounting policy in
respect of recognition of advance income (for
example, from the upfront sale of premium seats)
spreads such income evenly over the period to which
it relates. This is designed to address the risk of
Wembley National Stadium Limited applying
accounting policies that inflate the profits available for
immediate distribution to the Football Association.
The Football Association's own profits (including
money generated by the national stadium) must be
used in accordance with its objects for the benefit of
football in England. Under the lottery funding
agreement, the Football Association and Wembley
National Stadium Limited are unable to change their
objects without the agreement of Sport England.
4.10 There is no scope in the deal for the public sector
funders to share directly in any financial gains generated
by the project or to be involved in decisions about how
such gains should be used. The Department and Sport
England decided that it should be for the Football
Association to determine how any profits from the
stadium should be used in accordance with its objects
for the benefit of football.
Scenario 2: Wembley National Stadium
Limited breaches the public sector
funding conditions
4.11 During the course of the negotiations about the
contractual arrangements for the project the public
sector funders had at times to balance protecting the
public interest with allowing a deal that would be
acceptable to the commercial investors, thereby
enabling the project to progress. The public sector
funders accepted that in any deal their interests would
be largely subordinated to those of the senior bank since
it was providing over half the funding for the project.
4.12 Wembley National Stadium Limited and the senior bank
were particularly concerned to limit the ability of the
public sector funders to withdraw their money from the
project in the event that the funding conditions were
breached, as any funding gap would put at risk the
success of the project and the bank's investment in it.
Nonetheless the public sector funders did secure a
number of contractual provisions to protect the public
interest in the event of Wembley National Stadium
Limited breaching the funding conditions, including in
certain circumstances the right to withhold outstanding
funding or to recover from money otherwise payable as
distributions to the Football Association funds that have
already been paid.
4.13 The rights of the public sector funders depend on the
nature and timing of the breach of the funding
conditions concerned and, for the benefit of the project,
in some situations Wembley National Stadium Limited
has to be given time to remedy the breach. Some
funding condition breaches are regarded as more
serious than others and the contracts define a number of
'fundamental events' which are breaches of sufficient
seriousness that they are considered to be incompatible
with the standards of publicly funded projects or which
unacceptably compromise the public benefit. Examples
of key fundamental events are shown in Figure 10.
10 Examples of funding condition breaches that are
fundamental events
!
Wembley National Stadium Limited fails to meet its
obligations regarding the specified number of public
access seats in the new stadium.
!
The stadium is not made av...
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