Circuit of Wales: £7m bill questioned by Conservatives

The circuit backers have signed a deal to stage the British MotoGP motorcycling Grand Prix

Questions have been raised by the Conservatives over why a £7m bill owed by developers of the planned £371m Circuit of Wales racing track was paid by the Welsh Government.

The money was paid into the Heads of the Valleys Development Company's bank.

The firm said the cash ensured that work on the Blaenau Gwent track proceeded, and it intended to repay the sum with interest.

The Welsh Government said the loan was used to develop a business plan.

Ministers added that no other payment was made.

The Circuit of Wales promises to create up to 6,000 jobs in the unemployment blackspot of Ebbw Vale by building a motor racing track with hotels and industrial units.

Although insurers Aviva were named in February as the scheme's likely financial backers, the Heads of the Valleys Development Company (HOTVDC) has been in negotiations with ministers over the taxpayer shouldering some of the risk.

In April, then Economy Minister Edwina Hart rejected a request for the Welsh Government to underwrite the entire cost of the project.

In July, her successor Ken Skates said a revised proposal of 75% backing was still "unacceptable", asking developers to ensure the private sector took at least 50% of the risk.

Welsh Conservative leader Andrew RT Davies then wrote to Mr Skates, raising concerns about the effectiveness of grants and loans already made by ministers to HOTVDC.

Mr Skates replied saying a property grant of £2m had been paid to the firm between December 2012 and February 2013.

He added that "a loan provided by the company's bankers was in part underwritten by a Welsh Government guarantee.

"A payment of £7.334m was made to the bank under that guarantee in May 2016. No monies have been paid direct by Welsh Government to Aventa Capital Partners."

A Welsh Government spokesman said the bank "served a demand" on the government for the money.

"This loan enabled the company to develop a detailed business plan and to identify suitable private funding sources," he added.

"The loan guarantee expired on 8 April 2016 and no other payment has or will be made to the bank under the loan guarantee."

Mr Davies said: "The Circuit of Wales is a fantastic opportunity not only for the South Wales Valleys, but for Wales more generally, and yet this latest revelation casts more doubt over whether the Welsh Government has picked the right company to carry this vital project forward.

"In light of this latest revelation, one really has to ask why it was unable to pay its creditors.

"Given so many millions of pounds in public money has already been spent on the project, the Welsh Government must reveal if it is a guarantor to any more outstanding loans.

"It is vital that the government sees this project through to the end, but it is equally vital that the public receives assurances over how effectively its money is being spent and whether the project will in the long run bear any fruit."

An HOTVDC spokesman said "nothing here is new", and the £7m loan guarantee had been made public earlier this year.

He added: "The payment ensured that work on this project which, on completion, will provide significant economic opportunities to all of Wales, moved ahead.

"On successful financial completion this sum will be repaid to the Welsh Government with interest."