More questions have been raised over the financial viability of the Heads of the Valleys Development Company (HOTVDC) – tasked with delivering the Circuit of Wales project – after it was revealed the Welsh Government had to step in to pay over £7.3m to its creditors.
In a letter from the Cabinet Secretary for Economy Ken Skates AM to the leader of the Welsh Conservatives it emerged that a loan provided by the company’s bankers was in part underwritten by a Welsh Government guarantee.
Mr Skates states that a “payment of £7.334m was made to the bank under that guarantee” in May of 2016.
In finance, a loan guarantee is a promise by the guarantor – in this case the Welsh Government – to assume the debt obligation of a borrower, if that borrower defaults.
The Cabinet Secretary’s letter was in reply to an earlier from Andrew RT Davies AM who raised his concerns over how effectively the HOTVDC was using the money it received from the Welsh Government in the form of grants and loans.
This follows news in July that the HOTVDC had been billed more than £35,000 for gardening work done at its director’s £2.8m mansion.
A statement made in April by the former Economy Minister Edwina Hart announced that the Welsh Government could not underwrite the £357m needed to carry out the Circuit of Wales project owing an “unacceptable risk” to the government underwriting the entire project.
Commenting, leader of the Welsh Conservatives Andrew RT 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.
“Doubts as to the financial viability of Heads of the Valleys Development Company are mounting and 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.”
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