Q&A: Circuit of Wales racetrack project in Ebbw Vale

We seem to have been going around in circles with the Circuit of Wales. It is six years since the plans were first announced and now, on the last lap of quite a bumpy ride, the project with a chequered history has been brought to a shuddering halt.

What did it involve?

A development company would have spent £433m building a racing circuit and a "365-day leisure and business destination".

This latterly included mountain bike trails, a BMX park, a live concert stage, indoor skiing and a four-star hotel near an economic blackspot - Ebbw Vale in Blaenau Gwent.

The hope was for the creation of 6,000 jobs and 750,000 visitors a year.

In addition, the site would also have housed a £100m technology and research park and a £30m redevelopment of nearby business units.

Who was behind it?

Heads of the Valleys Development Corporation (HoVDC) - which had already secured a contract to host the MotorGP until 2024 on the strength of it.

Its head is Michael Carrick, of investment company Aventa, whose other project is a £300m cyber security and data campus in Cambridge.

Chief executive Martin Whitaker has headed Ford's motor sports programme and has been manager of the Bahrain international circuit.

Events and online sports channel Extreme came on board earlier this year, bringing more sports and activities to the project.

It was also backed by private banker Kleinwort Benson - a financial adviser tasked with finding the £100m "last piece" funding from private investors.

Insurance group Aviva was the main financial backer.

MotoGP signed a 10-year rights deal with the circuit

Why has it taken so long?

Planning permission was granted four years ago but there was a subsequent public inquiry, over the project taking over common land.

An offer of 800 acres (323 hectares) of replacement land was made and the hurdle was overcome in November 2015.

But the biggest delay has been over HoVDC wanting the Welsh Government to underwrite the project - provide a guarantee - and ministers and officials have been calculating the financial and political risk of this.

How would underwriting have worked?

It would have meant the Welsh Government would be there in the background - as a safety net - once the circuit was up and running.

Back in April 2016, ministers refused to take 100% of the risk on this and asked to HoVDC to come back with a more balanced deal. The next offer of 75% of the risk was also deemed unacceptable.

The company's latest proposal, given to ministers in February, involved the Welsh Government underwriting half of Aviva's private sector funding - £210m.

It would have worked like this: Circuit of Wales would have carried the risk during the construction phase.

But once the development opened in 2019, the Welsh Government would underwrite half of the cost.

In return, the Welsh Government would have been paid £99m over 33 years - equivalent to £3m a year.

But as guarantors, if the Circuit failed once it had opened, the Welsh Government would have had to pay Aviva £210m - although not all at once.

It emerged on Tuesday that backers Aviva would also still own the circuit and the infrastructure in the event things went wrong.

Economy Secretary Ken Skates said it had been assessed that there was a "very significant risk" the full £373m debt of the entire project would be classified against Welsh Government capital spending.

This would then have eaten into its budget for other projects - the equivalent of building 10 new schools or 5,000 new affordable homes.

What were the sticking points?

It was down to viability and risk. Could they make it pay? Were the estimates of 750,000 visitors a year wide of the mark?

Since February, ministers and officials have been looking in fine detail at the business plan in a due diligence period.

Mr Skates said pointedly that the estimate of 6,000 jobs from the project, through the supply chain, had been "significantly overstated".

The Welsh Government estimated as few as 100 direct jobs, with another 500 indirect jobs and 500 construction jobs during the building phase.

It believed the technology park as part of the plans would deliver most of the economic benefit - but that "could well require significant additional public funding".

Hosting the British MotoGP for the next few years had been a coup and would have brought thousands of race fans.

But the developers had already estimated that within 10 years, motor sport would only account for just over a third of its revenue.

Within four years, more income was expected to come from attracting fans to extreme sports and festivals.

By 2029, it projected the circuit development overall would bring in more than £70m a year.

Has any public money been spent?

HoVDC was given a £2m grant and £7.5m bank loan guarantee to help it progress plans and find private investors for the Ebbw Vale racetrack.

The final proposal from the developers said the £7.5m would be paid back in full, plus interest.

This has been subject to scrutiny by the Wales Audit Office which was critical of the way in which this was awarded, and there is also an assembly public accounts committee inquiry.

So what happens now?

When the idea for the circuit was first unveiled in late 2011 it was called "a real game-changer" for an area of high unemployment.

The £200m estimated cost of the circuit had more than doubled since and the vision has gone beyond just bike racing.

But the economic problems have not gone away in Blaenau Gwent. Mr Skates said local people "have waited long enough for the promised jobs".

Sports car-maker TVR has already chosen to base its new factory nearby and a new college campus in Ebbw Vale has given the Welsh Government something to build on.

The economic potential seen in the engineering and automotive technology park - part of the circuit plans - has now led to a Welsh Government commitment to a £100m project over 10 years "with local partners".

It says this has the potential to support 1,500 new jobs.

Ministers are also looking at the potential of locating a South Wales Metro depot in the Ebbw Vale enterprise zone.