BEIS0000367
BEIS0000367
RESTRICTED - POLICY AND COMMERCIAL
LINES TO TAKE
Legal Preamble
e You will be aware that our conversation takes place in the context of contractual
differences between ICL Pathway and the public sector parties.
. You will understand therefore that:
* Our discussion must be without prejudice and confidential.
* The public sector parties must reserve their rights and remedies under the
existing contract.
Meeting with the Prime Minister
e [understand that Mr Naruto’s meeting with the Prime Minister yesterday went well,
but I would be interested to hear your account of it.
Progress on developing alternative way forward
e All parties have worked hard over the last month to develop and cost a more
detailed specification for the alternative option identified during the discussions
between Steve Robson and ICL (Option B1). Grateful to ICL for their co-operation
in trying to find a way forward.
e Aware that intensive commercial negotiations on Option B1 continued over the
weekend, and made good progress in a constructive atmosphere; and that a joint ©
team of ICL/POCL lawyers are preparing draft heads of agreement.
DATEMPITOZTODMEET!.D0C. 36
BEIS0000367
BEIS0000367
RESTRICTED - POLICY AND COMMERCIAL
© However there are a number of very important issues still to be resolved, and we
have to be satisfied that the new option is affordable and offers best value for
money for the public sector.
e Very much hope that these issues can be resolved over the next few days, so that
Ministers will be in a position to take a final decision between the options. If the
decision is to proceed with the alternative approach, it will hopefully then be
possible to reach non-binding heads of agreement, in time for Fujitsu’s Board
meeting on 23 April.
DATEMP\TO2TODMEET!.D0C. 45
BEIS0000367
BEIS0000367
RESTRICTED - POLICY AND COMMERCIAL
Concern about length of time it has taken HMG to reach a decision whilst ICL
has continued to incur substantial costs each month.
e Regret that it has taken this length of time. However, as you are well aware, the
future of the project involves some very important issues for all the parties involved.
The Government has been anxious to seek to facilitate an outcome which, against
the background of the serious delays which the project has suffered, best meets the
needs of all the parties involved.
Failure of the project would destroy the prospect of a succesful early flotation of
ICL.
e Fully understand ICL’s concerns, and hope very much that such an outcome can be
avoided. That is what we are all working towards. However, ICL are not alone in
suffering financial pain as a result of the delays to the project.
The Fujitsu Board will meet on 23 April to sign off the 1998-1999 consolidated
Group accounts. Without a legally binding way forward on Horizon, the
company auditors will insist on a provision of around £300 million in the ICL
accounts - sufficient to make that company insolvent - which will flow through
into the Fujitsu consolidated accounts and Fujitsu will withdraw from the
project.
e Very much hope that it will be possible to reach an agreement which averts this
undesirable outcome. Value ICL’s contribution to the UK IT industry and your
relationship with Government.
DATEMP\TOZTODMEET!.00C. 55