09 January 2004
Government auditors have praised the Department for Transport for its role in the refinancing of the troubled National Air Traffic Services' public-private partnership.
On January 7, the National Audit Office published a report following up problems first identified in July 2002.
The initial PPP was criticised because Nats owed too much to banks and received comparatively little equity from investors, a situation that left it vulnerable to the downturn in air traffic that resulted after September 11, 2001.
But the latest report concluded that, following major refinancing, the Nats' PPP had been placed on a much more robust footing, enabling it to make further investment and expand the capacity of air traffic control.
The refinancing gave the Nats company a cash injection of £130m – half from the DfT and half from a new investor, BAA plc. The PPP also benefited from the proceeds of a bond issue.
The fresh money comes with fewer strings attached and the new financial structure has been tested on a wider range of scenarios, ensuring it is more robust, the NAO found.
NAO head Sir John Bourn said the success of the refinancing should be shared across Whitehall. He added: 'Other departments can learn useful lessons from the way the Department for Transport has played its proper part in the reconstruction, acting as a responsible shareholder, strengthening the company but ensuring that any additional public funds were matched by a new private investor.'
Edward Leigh, chair of the Commons' Public Accounts Committee, which last month published its own report into the Nats' PPP, said the successful refinancing was a 'creditable achievement'. But he added that safeguards should have been in place to stop the problems arising in the first place.
'Had the company not been so loaded with debt and so susceptible to downturns, the department would not have been in this situation and Nats would have avoided the 18 months of uncertainty and delayed investment,' he said.
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