Plans for Europe鈥檚 first integrated train and rail infrastructure testing facility at a former opencast mine site in South Wales are still advancing, with hopes that a proposed debt financing deal can be secured over the coming months.
The Global Centre of Rail Excellence (GCRE), first proposed by the Welsh Government seven years ago, is earmarked for a 700-hectare site -the size of Gibraltar - at Onllwyn in the Dulais Valley.
The land, which the Welsh Government acquired from opencast company Celtic Energy, already has planning consent and, subject to securing finance, is shovel-ready. The project has received expressions of interest from more than 200 firms looking to utilise its facilities, including Network Rail, Transport for Wales, and leading train manufacturers such as Hitachi and its Spanish rival Construcciones y Auxiliar de Ferrocarriles (CAF), which has a train-making factory in Newport.
The project would consist of two electrified seven-kilometre looped testing tracks for rolling stock and infrastructure, both designed to operate 24/7 year-round. It would also include train storage and maintenance facilities, a control centre, a 100-bedroom hotel, as well as training and R&D functions.
The project will require investment in land remediation, telecoms, utilities, and a connection to the National Grid. The site benefits from close proximity to the existing railway network, allowing rolling stock to be transported in for testing and certification. A later phase, outside of the 拢400m fundraise, could also see a rail-related technology park. This could be potentially privately funded.
GCRE, which is owned by but operates at arm鈥檚 length from the Welsh Government, has secured funding of 拢50m from the Cardiff Bay administration and 拢20m from the 海角视频 Government, originally signed off by the former Conservative Westminster administration. This leaves it needing to raise around 拢330m.
The initial fundraising activities, conducted through a public procurement exercise, was focused on securing a majority equity investor. However, while the process was narrowed down to three potential institutional investors, no bids were submitted, partly due to the economic fallout from the short-lived Liz Truss government in late 2023.
With this market failure, GCRE has continued discussions with other investors without the need for a new formal procurement process, while shifting the focus from equity to debt. GCRE has confirmed it is now in the due diligence stage with an undisclosed financial institution, a process expected to take several months to conclude.
GCRE is also working on options for a new ownership model that it hopes would lead to the Office for National Statistics (ONS) reclassifying it as being outside the Welsh Government鈥檚 accounting framework. This is critical to ensuring that any debt raised is not counted against the Welsh Government鈥檚 block grant from the 海角视频 Government. Currently, any debt raised must be held in reserve by the Welsh Government, limiting its spending flexibility.
An economic assessment by professional advisory firm PwC suggests that over ten years -excluding the planned later phase Sarn Helen Technology Park - GCRE could create 1,100 permanent and construction-related jobs, with a 拢300m gross value added (GVA) impact on the local area. The project has also been forecast to generate a 15-fold economic return for every 拢1 invested.
Simon Jones, chief executive of GCRE, said: 鈥2025 will be the moment when all of our hard work at GCRE over the last seven years comes to a decision point. From the start, the model for GCRE has been to use the public funding set aside for us - 拢50m from the Welsh Government and a 拢20m grant from the 海角视频 Government -to prepare the development to a point where the 拢400m project could be taken to market. That process began in April 2023, when GCRE undertook a public procurement exercise to secure the private finance we needed.
鈥淭hrough that mechanism, several credible potential bidders came forward, all of them committing significant time and resources to the process. They welcomed the detailed and creative GCRE proposals we developed, recognising the significant demand for such a facility, not just in the 海角视频 but across Europe, the Middle East, and further afield.
鈥淏ut like all major projects, it has not been plain sailing. No matter how strong the commercial demand for a facility like GCRE, gaining access to significant capital funding for construction was always going to be the greatest hurdle. Unfortunately, we began our search during a time of significant economic headwinds in the 海角视频. It was a challenging period for any major project seeking large-scale capital funding.鈥
On the failure to secure equity investment at the end of 2023, Mr Jones explained: 鈥淧otential bidders cited two main reasons for being unable to commit to our project. The first was uncertainty in the 海角视频 rail market, including a lack of pipeline visibility, changing political appetite for rail, and a consequent lack of committed revenue that could be guaranteed by the business. The second was wider economic factors, including above-trend inflation and interest rates.
鈥淲hat was frustrating for the team was that short-term factors seemed to threaten the progress of such a vital piece of long-term infrastructure investment -a once-in-a-generation opportunity for Wales and the 海角视频 to become a genuine leader in European rail innovation.鈥
On the current fundraising negotiations, Mr Jones added: 鈥淏ecause the formal procurement was unsuccessful, we were able to develop a more flexible approach to identifying and securing potential investors. This has allowed us to extend the search for investment partners. As a result, we are now in detailed dialogue with a new potential funder whose values closely align with ours. This could lead to a new approach to funding economic infrastructure, requiring changes to how the company is structured and owned in the long term. We hope to provide more updates in the coming months.
鈥淏ut the policy benefits of GCRE remain strong. Every 拢1 invested in GCRE will result in 拢15 of benefits for the local community and the national railway industry. While there have been challenges, we remain optimistic about the future. We aim to develop a world-class rail innovation facility in South Wales, serving significant European and international markets, while becoming a beacon for place-based economic development. The benefits for the surrounding communities, the industry, and the environment are substantial. This project can improve transport, rebuild local prosperity, establish a net-zero railway, and revitalise an amazing place.鈥
On financial returns, the project is forecast to achieve a positive EBITDA position of tens of millions of pounds by year ten.
If a funding deal fails to materialise, the Welsh Government could potentially fund the project entirely, possibly with additional backing from the 海角视频 Government. Over a three-year construction period, this would require an average annual investment of around 拢110m. Alternatively, while this again doesn鈥檛 reflect any thinking on the part of GCRE or the Welsh Government, the project could be financed over the long term through the Cardiff Bay administration鈥檚 mutual investment model, which has been deployed on projects such as the Heads of the Valleys road scheme.
If GCRE cannot be delivered, the Welsh Government would need to explore other uses for the land. As part of its deal with Celtic Energy, it inherited the site鈥檚 remediation liabilities - although partly offset by funds deposited in an escrow account by the mining company for required remediation.
