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Recommended that Full Council:
1.1Approves Portico’s
investment requirement of £20m over the next 10 years, to
deliver an overall return at today's value (net present value) of
£4.4m during the period 2024/25 to 2033/34, and agrees to
finance this, as follows (subject to recommendations 2.2.2, 2.2.3,
2.2.4 and 2.2.5 below):
 
§ 
£1.9m funded from Portico’s existing loan facility;
§ 
£13.6m funded from an increase in Portico’s loan
facility; and
§ 
£4.5m funded directly through the direct acquisition by the
Council of equipment and lease to Portico on commercial terms.
 
1.2 Agrees that the Council's Authorised Limit
(the maximum amount of borrowing permitted by the Council) and the
Operational Boundary (the maximum amount of borrowing that is
expected) approved by Full Council on 13 February 2024 is increased
to accommodate the phasing of Portico's £20m investment
requirement.
 
Agreed that:
2.1 The Council retain Portico and that the
amended budget (Section 6, Option 1) is adopted as the
Council’s preferred option.
2.2 Updated subsidy control advice is gained
by the Council.
2.3 The Council loan is provided on terms and
at a rate consistent with subsidy control legislation.
2.4 Any draw down on the loan facility by
Portico is subject to the following:
 
i)              
A rolling annual review of the 20 Year Business Plan demonstrating
the continuing viability of Portico and that the continued
operation of Portico continues to deliver the best financial return
compared with all other viable alternatives
ii)             
The Capital Investment is necessary either for the sustainability
of existing income streams or for the generation of additional
income.
iii)           
Any proposed Capital Investment itself represents the most
favourable return when assessed against the balance of:
§ 
The financial return on a Net Present Value basis and over the
whole life of the asset created versus other potential options for
the same outcome.
§ 
The relative risk of each alternative option.
iv)           
Approval by the S151 Officer.
 
2.5 Continued parent company support and the
availability of the loan facility is subject to the annual review
by the Company Advisory Board, and approval of a satisfactory
Budget and 3 Year Business Plan, which must demonstrate to the
shareholders satisfaction that:
 
§ 
The assumptions that underpin the 3 Year Business Plan are robust
with a more than reasonable chance of being achievable.
§ 
That the 3 Year Business Plan is prepared to illustrate the
financial effect of reasonable optimistic and reasonable
pessimistic scenarios, in order that the shareholder is aware of
the reasonable range of risk associated with the "Base Case"
Business Plan.
§ 
Recognising the exposure of the company to cyclical trade factors
and adverse weather, that the overall 3 to 5 Year financial results
of the Company provide an overall net return to the Shareholder
over the period taking into account all returns received by the
Shareholder through rents, dues and all other income elements of
services provided by the Shareholder (including the Portsmouth
International Port (PIP)).
 
2.6 The Council keeps under review the returns
that would reasonably be expected to be achieved from alternative
uses of the site, undertaking a formal review at the earlier of
every 5 years or an expectation that the financial performance set
out in recommendation 2.1.1 above is unlikely to be achieved.
2.7 Portico is restructured, to include the
creation of subsidiary companies and a holding company, as
recommended by the independent review, to enable the
business to remain competitive, and meet market needs.
2.8 It is noted that the Portico operation
provides additional volumes for pilotage and towage which supports
the need for a dedicated service for both aiding PIP cruise and
ferry.