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Subject:
Hi nick,
Thanks this is a good update - and not unexpected. It is important (if we've not already done so) to game how
this plays out; the choices options and risks we face and our plan without their support.
Regards,
K
Kevin Gilliland
Network & Sales Director
Postline "GRO I
On 17 Jan 2015, at 13:35, Nick Beal {
Following further discussions with NFSP this week relating to the Grant Agreement (GA)/MOU), I can
advise that NFSP have chosen to cease discussions on the basis that we have reached a stalemate
whereby we are not able to agree a mutually acceptable position on the termination aspects of the GA.
This is on the basis that the NFSP will not accept the principle of the inclusion of a Break Clause related
to a termination payment and therefore see no value in continuing the discussions. They have therefore
also refused to continue any discussions related to detail of the cliff and Network Extension.
This is not an unexpected outcome.
For info, we have had 2 meetings with them this week. Thursday’s discussions affirmed our position on
the Break Clause and they agreed to consider their position overnight. Friday’s meeting essentially
confirmed their position and was therefore cut short at their request as they were not prepared to
discuss any further aspects in light of our position.
Next Steps
I would anticipate the possibility of George contacting individuals in POL and BIS in the next few days to
re-iterate his position — that the Grant Agreement was a part of NT2 and promised, that POL are
defaulting on this aspect of the agreement and that with no agreement they will withdraw their support
for NT etc. This briefing note (or a verbal form in terms of BIS) is intended to support any responses to
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this — primary response being “these discussions and issues are to be channelled through the existing
business relationship point i.e. People & Engagement via Nick Beal/Neil Hayward).
I will be calling George on Monday to discuss his participation in the BIS Select Committee hearing
related to Horizon mediation scheduled for Feb 3. NFSP have been called to the hearing and yesterday
George agreed that a pre-meet would be welcome, bearing in mind his position that Horizon is fit for
purpose and he will be supporting this line, assuming he is sufficiently confident from us that this is the
position we will maintain also. There is obviously a possibility that he may use this as an opportunity to
leverage the Grant Agreement deal by threatening not to support us. The risk of this is low, but not zero
given the wider environment. However the timescale to the select committee is, in my view, helpful for
us as for George to change his position while there is still the potential of the Grant Agreement would be
a big risk to him.
During the course of this conversation on Monday, I would anticipate we discuss the wider
environment. I recommend the position to him is that:
1. We want to see an agreement reached.
2. We understand that NFSP have a requirement to ensure their future is protected in the event of
the agreement being terminated.
3. Weare not entering the agreement with the intention of terminating but do need to balance
our own risks and see the Break Clause as a means to do this.
4. The next meeting could include Neil’s participation if NFSP felt this would be productive.
5. We would like to discuss the detail of a Break Clause and include aspects to give them comfort —
that could include assuring that this is not a cost cutting attempt by POL (i.e. we are committed
to the £1.5m pa annual grant from when we reach agreement — the existing assumed cost to
POL) and that detail of any break clause could include, for instance, a mediated review of the
how the agreement has worked in the years up to the break clause (suggested around 2 to 3
years), albeit entering into his review would not assume a binding outcome would be achieved.
(Note that points 1 to 3 have already been made, points 4 and 5 have not yet been discussed).
In the event of this being insufficient for NFSP to engage in further talks, bearing in mind their aspiration
(but not yet made public) to hold a special conference on March 19" with papers issued on Feb 5", their
options as I see it are as follows:
1. Put back the proposed date of their SC in order for talks etc. to continue
2. Go into the SC without an agreement with PO but seek a mandate from their SC as to getting an
agreement with certain terms with CWU/NFRN/Do Nothing as an alternative if these terms are
not met.
3. Go into the SC without an agreement with PO and present the CWU/NFRN/Do Nothing as the
only options, including withdrawal of support for NT compulsion etc.
4. Compromise on the Break Clause aspect in order to reach agreement with us before the SC.
5. Withdraw their demand for a Termination Payment and take a risk that we would not be able to
terminate the agreement. (Note — in this scenario we could either fall back to the previous
drafting of the agreement whereby, if required, we would seek to terminate on the basis of the
previously agreed Events of Termination or insist that, as NFSP have now opened up the
possibility of a Termination Payment/Break Clause, we are now insisting on a Break Clause. The
latter would be our preferred outcome but, recognising the original position we took in the
MOU/drafting, we could assume our red line as the former).
Our options will be driven by the Negotiating Mandate, an updated version of which is attached.
I will of course update as the situation develops.
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Nick Beal I Head of Agents’ Development & Remuneration
People & Engagement Team
J
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<NFSP Negotiating Mandate Jan 15 v2 16-1-15.xlsx>