The 海角视频 Government has still to sign off transfer of the rail asset to allow the Welsh Government to start electrifying the Core Valley Lines 鈥 with any future delay potentially putting at risk a 拢158m contribution to the project from the European Union.
The Welsh Government, which has called for all rail infrastructure in Wales to be devolved, needs the asset devolved from Whitehall, so it can commence physical work on the 拢738m project to electrify the Merthyr, Rhymney and Aberdare lines, as well as the Coryton Line in Cardiff.
It will be delivered by KeolisAmey, the operator of the Wales and Borders rail franchise, on behalf of the Welsh Government鈥檚 at arm鈥檚 length transport body, Transport for Wales.
However, it is understood that if the asset isn鈥檛 transferred in time to allow work to start by March next year, it could compromise the target of completing the project by the end of 2023.
The EU funding is contingent on the project being completed by then and fulfilling the requirement of increased frequency and capacity of services, through new tram-trains and trimode trains, across the Core Valleys network.
The trimodes trains, which will be able to switch between battery, diesel and electric modes, will operate on the Rhymney Line.
If the project鈥檚 delivery goes beyond 2023 it is unclear whether the EU would pull the entire 拢158m in funding or a percentage of it.
With the 海角视频 then outside of the EU, the Welsh Government would no doubt look to the 海角视频 Government to make up any lost finance from Europe, particularly if it was a result of the Department for Transport delaying rail asset transfer beyond March.
KeolisAmey are confident the project can be delivered for Transport for Wales to budget.
The Metro project鈥檚 funding consists of 拢158m from the European Union, 拢445m from the Welsh Government and the 拢1.3bn City Deal for the Cardiff Capital Region and 拢125m from the 海角视频 Government.
As it stands the project would be liable for VAT at 20%. However, potentially Transport for Wales could be classified as coming under section 33 of the VAT Act 1994, which would allow it to reclaim back any VAT paid.
Public sector bodies, such as local authorities, Highways England, Natural Resources Wales, the police and the BBC, are covered by the Act. However,聽 the legislation is quite clear in that government departments, and this includes the Welsh Government, cannot reclaim VAT.
If Transport for Wales were able to reclaim the VAT, it would reduce the project鈥檚 cost by nearly 拢150m. However, whether the Welsh Government would allow Transport for Wales - assuming the cost of the project didn鈥檛 spiral - to use the money to invest in other rail projects in Wales would be matter for future discussion.
In a statement before the calling of the General Election, a spokesperson for the DfT said: 鈥淲e have been working closely with the Welsh Government on the divestment of the Core Valley Lines and we remain on track for the Secretary of State to reach a final decision later this year.鈥
When asked to provide an update it said it couldn't do so until after the election.
Transport for Wales declined to comment when asked whether if work didn鈥檛 commence by March the Metro project could be in danger of missing the end of 2023 deadline, so putting at risk EU funding.
A spokesperson said: 鈥淩ail industry partners continue to work collaboratively alongside Government colleagues to undertake the necessary steps to ensure the transfer of Core Valley Lines (CVL) happens safely and in line with industry processes.
"Transport for Wales鈥 exciting transformation of the CVL includes a 拢738m investment, of which the transfer of the CVL asset transfer is a key enabler.
鈥淭he asset transfer is currently planned to take place on 31 January, with all the relevant processes and government approvals having been put in place. Industry partners are focused on the delivery of the transfer in time to ensure that we are able to deliver our commitments to deliver brand new rolling stock, and a Metro service for South East Wales by 2023 the people can be proud of.鈥
