Q81 Mr Bacon: Assuming the inflation assumption you have in your model, what is the total amount of cash? For how many years are you expecting to make the annual unitary payment? You are not moving in until 2005. Is it for 26 years?
Mr Gieve: It is for 26 years.
Q82 Mr Bacon: So you are expecting to pay £30.3 million per year for 26 years plus inflation. Is that correct?
Mr Gieve: Yes.
Q83 Mr Bacon: Using your inflation assumption what is the total cash you expect to pay out? Without inflation it would be £30.3 million # 26, which would be £787 million. I am asking, if you add on inflation, where would you get to?
Mr Gieve: We index by 75% of the RPI. I do not have the cash number.
Q84 Mr Bacon: I do not have a lot of time. In the Treasury building they are paying out £14 million for 35 years which comes out at £491 million; if you add inflation they are expecting £838 million. In the MoD building they are paying out £55 million over 30 years which comes out at £1.65 billion; if you add on inflation they are expecting to pay £2.514 billion. I am asking what your numbers are.
Mr Gieve: I do not have that number.10
Q85 Mr Bacon: If you could put in a note, that would be great.11 What is your discount rate, 6%?
Mr Gieve: It was 6% when we did the deal.
Q86 Mr Bacon: So that is what is in this contract.
Mr Gieve: It has now changed.12
Q87 Mr Bacon: Yes, but what is in the contract, your working assumptions.
Mr Gieve: The working assumption is 6%.
Q88 Mr Bacon: May I ask you to turn to page 19, paragraph 2.8? It says that this payment, equivalent to a £275,000 increase in the annual payment to the consortium, allowed a 1.1% increase in the internal rate of return. What is the total internal rate of return now?
Mr Gieve: This is the internal rate of return on the equity.
Q89 Mr Bacon: No, no. I want the internal rate of return on the whole project.
Mr Gieve: The equity return was 1.1% which was additional to 16% which was the calculated return on equity.
Q90 Mr Bacon: So it is now 17.1%, is that right?
Mr Gieve: That is right. Sorry, 15% ! 1.1% %16.1%.