The Government of Wales has recently confirmed it cannot guarantee 100% of the necessary funding for the £400 million (US$564 million) Circuit of Wales PPP project in Ebbw Vale.

This announcement comes after Aviva Investors agreed, in February, to provide most of the funding for the project. 

Heads of Valleys Development Company (HoVDC), the current project owner, has communicated that it will continue with negotiations in order to satisfy all parties.

According to local press, the final official advice recommended that the Government of Wales should not agree to provide a 100% financial guarantee due two principal reasons: a significant question around the viability of the project and an unacceptable risk to the government. The Business Minister Edwina Hart said:

"The final official advice recommends that I should not agree to underwriting the £357.4m Aviva investment in the scheme for two reasons.

"First the significant question around the viability of the project and secondly the unacceptable risk to the Welsh Government of in effect underwriting the entire project.

"These two factors mean that there is both a significant value for money gap and a real legal challenge around issuing such a guarantee.

"It is important to remember that this project started as being one that would be fully funded by the private sector risk capital without the need for a government guarantee."

The Circuit of Wales will be located north of Ebbw Vale close to the Rassau Industrial Estate. The development will span 336 hectares and represent the most significant capital investment program in automotive and motor sports infrastructure in the UK in the last 50 years.

The main race track is 3.5 miles in length and there will be additional smaller circuits for karting, motocross and 4x4, hotels, retail space and a technology park, among others.The circuit is being designed to FIA and FIM high standard levels.

The number of visitors in the region derived from the construction of the project is projected to be around 750,000 according to Government predictions. The goal is to have the entire circuit development completed in 2020.

Last moth we reported that just weeks ahead of the beginning of works on the project, Alun Griffiths, one of the main contractors, had been replaced by civil engineering firm Roadbridge. Spanish construction company FCC is the project’s main contractor.