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Circuit of Wales hit as Welsh Government cannot underwrite project

The Welsh Government says it cannot underwrite the £357m Circuit of Wales but the project will continue with further negotiations.
The Welsh Government says it cannot underwrite the full £357m of Circuit of Wales but the project will continue with further negotiations, according to CEO Michael Carrick.

Edwina Hart MP has confirmed there is an 'unacceptable risk' for the government to underwrite the entire project having taken external legal advice.

Earlier this week the Circuit of Wales, which has faced a number of hurdles since it was first announced in 2013, expected a decision set to be made on whether the investment of taxpayers' money is classified as state aid – which is illegal under European Union Law for such a project. Circuit of Wales lawyers had maintained the project would provide up to 6,000 new jobs in the Blaenau Gwent area, but without Hart signing-off the project could collapse.

In an open letter from Hart to First Minister Carwyn Jones, the government has been working with the Circuit of Wales for a viable solution without success but is still open to supporting the project if any new investors can be found to help.

"As you will be aware we have been working to support this project for a significant period of time and have already in effect spent around £9m in support of its development,” Hart's letter said. "We also explored sharing the risk with several local authorities, and as you are aware that option also failed unfortunately.

"In these last few days we have considered that a guarantee of 80% of the total value of the project may have reduced our risk to an acceptable level, but the circuit have not been able to secure any real private risk capital and so this option has not been possible."

Ministers had initially agreed to provide a grant aid of £16m to support the jobs created by the Circuit of Wales but negotiations faltered when the Welsh Government was asked to provide financial guarantee to the private funding from backers Aviva.

Michael Carrick, CEO of Heads of The Valleys Development Company which is behind the project, has confirmed talks with the Welsh government and Aviva will continue with the plan now delayed.

"We respect and understand the minister's decision on the support for a 100% guarantee for our private funding,” Carrick said. “While this was our clear preference and reflective of the negotiations we have held over the past six months, we accept that the project will need to progress on revised terms.

“The pre-enablement works and ecology activity has already commenced and we have a range of contractors engaged on creating sustainable employment opportunities in this challenged area.

"We will continue negotiations with the Welsh Government, the local authorities and Aviva Investors to advance the development on revised terms that will be acceptable to all parties."

The project could be delayed further with the Welsh Assembly being dissolved ahead of next month's elections and a revised schedule is to be expected.

The Circuit of Wales project is targeting the creation of between 4,000-6,000 new jobs over the next ten years through commercial developments, planned business relocations and motorsport-related opportunities.

The venture secured a five-year deal with Dorna which began last year and had originally hoped to move the event to Ebbw Vale in 2017 but after interruptions in confirming financial backing MotoGP has been delayed by 12 months, with the Welsh circuit expected to take over hosting duties in 2018.

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