The Ministry of Defence (MOD) has signed a contract to sell the Government Pipeline and Storage System (GPSS) to Compañía Logística de Hidrocarburos (CLH) of Spain for £82 million. The contract also protects the future supply of aviation fuel to both the military and commercial airlines in the UK.
This means that MOD is close to completing the three major elements of the Asset Management Programme that it launched following the 2010 Strategic Defence and Security Review. The Defence Support Group land business is being sold to Babcock for £140 million, with major downstream savings to Defence, and Solent Gateway has been selected as preferred bidder for the concession to manage, and exploit the commercial potential of, the Marchwood Sea Mounting Centre, again generating significant downstream savings.
The GPSS fuel storage and distribution network supplies aviation fuel to UK military bases, including those supporting US visiting forces, and the UK civil aviation sector. As part of the sale, an enduring contract has been agreed between the Secretary of State for Defence and CLH which will protect the GPSS supply of aviation fuel to the military, while also protecting our national civil resilience.
CLH will provide long-term investment in the GPSS network to maintain safe, secure and timely access to the fuel supply across the country, and place the GPSS network on a sustainable long-term footing for many years to come.
Minister for Defence Equipment, Support and Technology Philip Dunne MP said:
I am delighted with the successful completion of another Defence asset sale. Signing this transaction with CLH has generated a major capital receipt for Defence while safeguarding supply of aviation fuel to both military and civil customers throughout the United Kingdom.
The £82 million proceeds from the sale represent excellent value for money for the taxpayer and will allow us to continue to focus our resources on the front line.
CLH will bring unique experience to the operation of GPSS as it operates and maintains a network of oil pipelines (over 4,000 km) and storage systems serving major airports across Spain. In addition it provides fuel transportation services (including storage and pipeline facilities) to military customers in Spain.
The MOD launched the sale competition in July 2014. CLH offered the best deal in terms of value for money, while protecting the capability to supply fuel to UK military bases and civil airports.
The sale completion is expected on 30 April 2015, and CLH will commence operation of the GPSS from that date.