Despite holding a contract to stage Britain’s MotoGP race, the racetrack-cum-technology cluster project at the Circuit of Wales is mired in delays and tied up in bureaucracy and British motorsport politics. Some still believe it will never happen. But frontman Michael Carrick, who will be speaking at the Black Book Race Forum at the Honourable Artillery Company in London on 30th June, retains his steadfast belief both in the ambitious plans and in his ability to deliver them.
By David Cushnan
Last August, Dorna, MotoGP’s commercial rights holder, stunned the motorsport world by announcing it had reached an agreement to move the British motorcycling Grand Prix from Silverstone, its home since 2009, to a planned but unbuilt new facility in a much wider technology cluster planned for an area near Ebbw Vale in Wales. The project, known as the Circuit of Wales, had been in the works for several years. But with little information about how the full project was to be funded, Dorna’s decision to commit to a five-year deal, with the option of a further five, sent shockwaves through British motorsport’s chattering classes. Some insisted that the circuit would never be built.
Ten months or so on, construction has still not yet begun: planning permissions still have to be granted, investors are still being sought and the next two British Grands Prix have been relocated, first to Donington Park and then after a contractual dispute back to Silverstone. Yet according to Michael Carrick – who has assumed the role of frontman for the Heads of the Valleys Development Company, which is behind the Circuit of Wales and its proposed surrounds – the project, although complex, bureaucratic and mired in frustrating delays, is still on track. As he insists, “the size of the prize is too large to walk away from small challenges”.
Spread over 830 acres of Blaenau Gwent in the Welsh valleys, a 45-minute drive from Cardiff, the Circuit of Wales plan is described by its architects as ‘the most significant capital investment programme in automotive infrastructure in the UK in the last 50 years’. Aside from the circuit, the plans for which show an undulating layout designed chiefly with motorcycles in mind, the proposals include a low-carbon technology park, an international karting track, ‘high-end’ industrial units, retail space and a motorsport academy. It will all be sited in one of the UK’s most impoverished areas. As Australian-born Carrick, whose background is as an investor and financial advisor in infrastructure, wants to make clear, it’s “a good story, but not just a motorsport story”.
“Everybody wants to talk about the motorsport and everybody’s excited about having a new facility,” he suggests, “but it isn’t about the 5km racetrack on the side of a Welsh valley, it’s about the regeneration aspects of a major piece of infrastructure and the benefits that can bring to both immediate investors and then follow-on investors who can take advantage of the core infrastructure that’s in place.”
As chief executive of Aventa Capital Partners, described as an ‘impact investment manager, focusing on the infrastructure sector’, which was formed in 2011, Carrick is spearheading what he believes is a new approach to major development programmes across the UK. “I felt the types of projects that were available for investors to support were programmes of investment that actually didn’t contribute an awful lot to our regional growth, our industry development or the UK’s market position,” he says, sipping a coffee and explaining, assuredly not for the first time, the story of how he has come to front such a high-profile, feather-ruffling endeavour.
“We’re doing this project because the types of investment we believe are fundamentally necessary for regional growth in the UK are new programmes aligned to our core industries,” he adds. Aventa has a series of programmes running across the UK, all examples of what Carrick describes as a “new form of partnership between industry, local authorities, regional and national governments, financial institutions and investors”.
Assessing the UK marketplace, he says: “We’ve seen the transition and movement away from the types of public-private partnerships that were common over the last 15 years, which have dealt with social infrastructure – schools, hospitals – and movement away from the economic infrastructure – airports, ports, toll roads, which are not getting built in the UK any more – and a move towards recreational, industrial and economic activity which looks slightly different to the historic infrastructure of the past but have some very similar characteristics. If you can put in place the contractual support packages that allow institutional investors to support those programmes, then you have a very good partnership. Investors like to support regional growth, investors want their money to do more than simply make a return; governments use their enabling role to bring private capital in and we have a significant transformational asset in one of our leading industries, which is positioned for growth.”
The specific financing plan for Circuit of Wales is complex, necessarily confidential in part, and has therefore been a subject of much speculation, particularly amongst those in British motorsport wary of the potential competition and threat posed by a new world class motorsport facility in the country. Carrick, speaking in April, begins his attempt at an explanation by pointing out again that the project goes well beyond mere racetrack. The total development cost currently stands at UK£325 million. Carrick says that figure is rising – “and we want it to, because it means we’re spending more money on facilities that are necessary”. The money is being raised partly through private funding and partly, controversially, through government support.
“This is a construction project and a demand project,” explains Carrick (left). “Construction and demand mean you need a more conservative financial structure when you start.” Aventa is operating in a difficult marketplace: banks, Carrick says, don’t want to lend to development projects and investors are naturally cautious when it comes to early stage development risk. Aventa has therefore taken on that early upfront risk, including site approvals and acquisition, and contract negotiations. “We have more equity than you would traditionally associate with an infrastructure project: UK£200 million,” Carrick reveals.
The remaining UK£125 million is being raised through other types of funding, notably a government grant allowable due to the site’s location and status as a ‘tier one assisted area’. Former Silverstone chief executive Richard Phillips wrote to British prime minister David Cameron in March 2014 suggesting that amounted to illegal state aid, but Carrick argues that “we get stuff that, frankly, they [other circuits] have been trying to get for years and haven’t been successful with – the reality is we’re getting no beneficial treatment, other than what anybody would get if they were offering a major investment in a tier one assisted area”.
Aventa, meanwhile, is trying to raise the UK£200 million and attract investors – many of whom will always remain private – to the project. Again, it is a complex situation and the lack of clarity has certainly added to what Carrick freely admits is something of a credibility problem. Some investors, he says, would rather not go into the project directly, preferring it to form part of a more diversified portfolio of projects. Others are willing to invest directly. A third group feel more comfortable in investing in a Europe-wide portfolio, of which the Circuit of Wales forms but one element.
Even with confirmed investors, there are conditions attached. “We still don’t have consent to build, we’re still negotiating our final pricing with our construction partners, we’re still going through due diligence on our debt provision, we still have to sign our grant agreements,” Carrick notes, checking off a daunting-sounding list of deliverables. “We’re well behind where we expected to be – at least two years behind,” he confirms, delays he puts down to the necessarily bureaucratic processes relating to planning permissions and land acquisitions.
The site lies on what is known as ‘common’ land; permission to make permanent changes requires consent from “pretty much everybody in the country”, explains Carrick, not even half-joking. That includes environmental bodies, who have objected to the plans. Counter-arguments have taken up significant time and resources, while another condition of building on common land is that an equivalent amount is acquired elsewhere. The size of the project means that the process must be carried out in painstakingly piecemeal fashion. As Carrick points out: “If you could find 830 acres of land elsewhere that wasn’t common, we would have built on it.” The scale means there is no historical precedent, either, presenting another complication.
Nonetheless, Carrick hopes that a best-case scenario of permissions granted and funding raised would allow construction to begin in Q4 of this year; detailed design work – the initial renderings which illustrate this piece are the work of Populous – has still to take place, while FCC and Alun Griffiths have been appointed as construction partners. Some temporary work is being carried out on the site: for example, work on encouraging a lounge of lizards who call it home to migrate north. Nothing else is, for the moment at least, allowed.
“The assumption that these delays are down to challenges within the developer organisation or industry activity are just incorrect,” he insists. “Although everyone is focusing on the money, the capital structure hasn’t changed for about four years. What we’ve been doing is discharging all of our conditions and investment to make sure we can invest, through Aventa, and feel we have met all the conditions that allow us to draw down that capital on the promises we’ve made to investors.”
Carrick is well aware of the paddock talk up and down the country and that he and his project have significant critics in influential positions in British motorsport, notably Jonathan Palmer, the former Formula One driver who owns Motorsport Vision, the owner and operator of a number of British circuits including Brands Hatch, Oulton Park and Snetterton. “Is there a credibility issue?” asks Carrick. “I think there has to be, and there will be until we close it. Is there a vested interest in the industry to want to build this? The answer is no there isn’t and that’s the incredibly disappointing aspect of what is effectively an immature and quite unprofessional industry.
“The individuals who have spoken about our project have all focused on the operational aspects of the activity; they haven’t recognised at all that what we’re trying to achieve is multiple objectives – one of which is trying to improve the quality and offering of the motorsport product, which we’re going to do in spades. Why would it not worry them? There is scope in the marketplace for new capacity to come into the business: why on earth do we have all these wonderful football stadiums around the country and yet we only have one or two international motorsport venues, who, quite frankly, are pretty poor in getting those international events right?”
Populous has supplied initial renderings for the Circuit of Wales but detailed planning work for the course's infrastructure has yet to take place.
Carrick adds that he believes British motorsport has been stung by the rash promises and poorly structured financing plan that saw Donington Park sold, and the rights to stage Britain’s Formula One Grand Prix acquired, only for the project to collapse leaving the venerable old circuit in a state of disrepair in 2009.
“I’ve never had an experience like this in any other industry,” he adds, although he is keen to point out that the new management at Silverstone, led by former Co-Op executive Patrick Allen, has made for a refreshing change. “I think you have to have patience, you have to be very, very robust and thick-skinned to want to do this,” Carrick admits. “You’d have to be moronic not to recognise what we’re trying to put in place will have an impact on other venues, but it’s similar to building Stansted Airport and comparing it to Norwich Airport. The reality is they don’t have the same business model as us; they don’t have the same economic platform for growth, operational performance and the same demand.
“We understand the natural levels of scepticism,” he continues, “but I think it is going away. The challenge we have at the moment is we’ve created aspiration, hope, expectation, in a community that had no hope, aspiration or expectation – our pressure is making sure we not only deliver the asset but we make what happens on that site really sizzle.”
August’s announcement by Dorna that it was sending Britain’s MotoGP race to the unbuilt venue was, Carrick explains, based on the need to “mitigate”. He says: “The only mitigation strategy to encourage investors that you build it and they will come is if you have a commercial obligation for an event to come. It’s a critical success factor and a condition of our investment that we have a major international event anchored at Circuit of Wales for the foreseeable future.”
At a more practical level, Aventa knew it was necessary not to allow Silverstone to renegotiate a new long-term deal with Dorna. “That would have caused us major problems in attracting, securing and maintaining investment,” Carrick adds. “We never focused on Formula One, we focused on MotoGP – it’s incredibly exciting, stunningly exhilarating; it’s an anchor motorsport, an international event. And, thirdly, the attitudinal approach of Dorna is to support development in new circuit infrastructure.
“I suspect MotoGP has been a poor second cousin to Formula One in the UK for some time,” he continues, “so it’s good to give them a focal point.”
Further concrete development of Circuit of Wales’ event strategy is some way away, but Carrick believes that the venue will be such that it is “difficult to ignore” for domestic and international championships, on two wheels and four. On Formula One, he adopts a diplomatic stance.
“We’ve never had a conversation with them – they have a contract in place with Silverstone,” he says. “We think it is a fantastic motorsport product by any metric but it is a commercially challenged event for a circuit to undertake without financial assistance. It’s unlikely we would get financial assistance to deliver Formula One, so unless Mr [Bernie] Ecclestone wants to drop the price I don’t think there’s any element of anchoring Formula One at Circuit of Wales.” A pause, and then a tantalising addendum: “That doesn’t mean there won’t be some potential in the future for Formula One – I think there will be.”
But as Carrick has always maintained, Circuit of Wales is about far more than mere motorsport. The prospect of changing lives for the better, having a positive impact upon a community and providing some economic stimulus are what is driving him and his team on, despite the deep frustrations of red tape, criticism and what he calls some “deep, dark moments”. He is clearly emotionally attached.
“We get pressure from our own team, we get pressure from our consulting team, we reach the end of our commercial tolerance around how much exposure we want to have as a business,” he starts, “but you remember the size of the prize and remember that you are doing this fundamentally for people who can’t do it themselves. We have the skills, the confidence, the appetite and the resources to be able to drive this forward and now we’re getting the recognition from institutions and others that regeneration does matter; that investment, impact does matter to local communities.
“Motorsport is good for investors, good for community, good for economic growth and good to do things outside of central London. We are confident and competent in all we have to deliver. We are an element of frustrated at the challenges that have been put in our way, we recognise them and we still have time and effort and energy and cost to deal with them. Ultimately, when it’s up in three or four or five years’ time, people will look at it and wonder why, in one of our core industries, this wasn’t done years ago.”
The next two years: a temporary solution
With no circuit on which to host the Grand Prix it holds the rights for, it was immediately clear that Circuit of Wales would have to strike a deal with one of Britain’s existing MotoGP-standard circuits for the 2015 and 2016 events. When its Dorna deal was struck in August, the Circuit of Wales’ relations with Silverstone and in particular former chief executive Richard Phillips were, to say the least strained, so dialogue and then a heads of terms agreement followed with Donington Park.
Donington had hosted the British MotoGP event until Silverstone won the contract in 2009, but ultimately its deal with Circuit of Wales collapsed in February. Accounts differ as to precisely why but for Carrick’s part, he simply says: “We weren’t going forward with a contract that didn’t work.”
MotoGP will head to Silverstone for two years
In the interim, relations with Silverstone had been thawing, thanks to the arrival of a new leadership team at the Northamptonshire circuit. A deal was soon struck whereby Silverstone will host the event in August and in 2016 but it will be run in partnership with the new Circuit of Wales team. “It’s a partnership,” Carrick says. “We hire the circuit and some supporting services from Silverstone. There’s a fine line – I don’t want the perfect race at Silverstone. But what we are going to do is make it much more attractive to the consumer of MotoGP.”
A spectator target of 80,000 has been set, while a Welsh flavour will be injected into some of the surrounding entertainment and activities, part of a gradual effort to build up a head of promotional steam for Circuit of Wales.
“This is a Circuit of Wales event but at Silverstone,” Carrick stresses. “They are the best at what they do in the country. We’re not looking to undermine, we’re looking to take advantage of it. And it’s like-minded. Silverstone want this to be successful because there is a risk the Circuit of Wales won’t go ahead and therefore it will be at Silverstone for the foreseeable future. It’s in Silverstone’s best interests and it’s also commercially very profitable; Silverstone are also not in the position to be able to turn down a huge amount of cash. The oligopoly that will exist between ourselves and Silverstone is good for our industry.”
This article features in the June 2015 edition of SportsPro. Subscribe today here.