Plans to build a £360m racetrack in south Wales are in serious doubt after the Welsh Government refused to underwrite the project.
Economy minister Edwina Hart said there was a “significant question around the viability of the project”, following months of negotiations.
The project’s developer, Heads of The Valleys Development Company, which is backed by insurance giant Aviva, had hoped to reach financial close this week, but Ms Hart said there was an “unacceptable risk” to the government underwriting the entire project.
The construction contract for the Ebbw Vale scheme was won by FCC in 2012, in a partnership with Welsh civil engineers Alun Griffiths.
But Alun Griffiths backed out the project in February, with Irish contractor Roadbridge taking its place, as revealed by Construction News.
The latest news will come as a major blow to both contractors, which had expected to have already begun work on the much-delayed project.
The developer and the Welsh Government had been locked in talks over funding for the project over the past six months.
However, talks broke down after the Welsh Government was unable to agree to the 100 per cent guarantee sought by the developer.
CREDIT_National Assembly for Wales_Edwina Hart
Source: National Assembly for Wales
In an open letter to first minister Carwyn Jones, Ms Hart wrote: “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.
“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 per cent 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.”
Heads of The Valleys Development Company chief executive Michael Carrick said talks between the Welsh Government and private backer Aviva will continue but plans to build the racetrack would be delayed.
He said: “We respect and understand the minister’s decision on the support for a 100 per cent guarantee for our private funding.
“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.”
Construction was expected to start before the end of 2013 but was postponed after the project failed to win planning permission and struggled to get funding.
The Welsh Government granted final planning permission last November, after the Circuit of Wales revealed it had secured a financing package for work to begin.
Once completed, the project will include a 5.6 km track as well hotels, retail space and a technology park.
It is hoped the project will be finished in time for the UK’s Moto GP race in 2018, with the venue set to host the event until at least 2024.