The proposed Circuit of Wales has suffered a fresh setback after the Welsh government announced it would not underwrite the £357 million project.
The Circuit of Wales is intended to be the newest permanent racing facility in the UK, and had a contract to host the British MotoGP round from 2015 until 2019.
The race remained at Silverstone for 2015 and is likely to until 2017 at the earliest, but there are now fresh doubts about the viability of the Circuit of Wales project.
Heads of The Valleys Development Company, the body behind the circuit, announced last November it had secured the finance required to buy the land in the Blaneu Gwent region thanks to insurance company Aviva.
However, the Welsh government informed HOTVDC earlier this week that it would not underwrite the £357 million ($503 million) project due to concerns about its viability and the risks involved.
“The final official advice recommends that I should not agree to underwriting the £357.4m Aviva investment in the scheme for two reasons,” economy minister Edwina Hart wrote to Welsh first minister Carwyn Jones.
“Firstly 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.
“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 £9 million in support of its development.
“We also explored sharing the risk with several local authorities, and 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.”
HOTVDC responded by saying it would explore alternative commercial options following this setback.
“We respect and understand the minister’s decision on the support for a 100 per cent guarantee for our private funding,” CEO Michael 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.”