By Sion Barry

Copyright walesonline

The Cardiff Capital Region has confirmed a sizeable rise in the cost of a legal challenge over how it awarded a £30m contract to demolish the former Aberthaw Power Station. The city region, made up of the ten local authorities of south-east Wales, acquired the former coal-powered station – which occupies a 500-acre site in the Vale of Glamorgan – from energy giant RWE in 2022 for £8m. Through its subsidiary business, CCR Energy, it then entered a competitive procurement process, which saw Erith winning the £30m contract to demolish the plant, as part of plans to eventually turn the site into a green energy park. However, a successful legal challenge over how the contract was awarded was lodged by losing bidder, Brown and Mason Group. In February, the city region abandoned its legal defence with a settlement agreement of £5.25m with Brown and Mason. However, that figure did not include related legal and professional costs incurred by both parties. The city region has now confirmed that those additional costs amount to nearly £910,000, bringing the total cost associated with the legal challenge to around £6.16m. The city region is also facing a six-figure bill for an independent review into the Aberthaw procurement process, which is being carried out by professional advisory firm Deloitte. The findings of that report will determine whether the Wales Audit Office carries out its own investigation. These costs have been met from the significant returns the region has generated from its lending activities. At the time the contract was awarded to Erith – which will benefit from the scrap value of the power station – the city region’s accountable body was Cardiff Council. It carried out the procurement process for the demolition contract on behalf of the city region and CCR Energy, supported by external legal advice. Depending on the outcome of the Deloitte report, the city region could potentially seek legal redress for its costs, although the council is indemnified. The £6.16m and the Deloitte report have been financed by the city region from its own positive balance sheet. Through its £1.2bn City Deal – which is close to being fully invested – the lion’s share of around £700m has gone towards the £1bn South Wales Metro rail electrification project. The remaining £500m was allocated to its wider investment fund, which as well as grants has investing equity and provided loans to companies operating across the region. Even after the impact of the Aberthaw successful legal challenge, the city region has accrued £19.1m from interest and capital repayments from its loan activities. To date it has also made four investments from its £50m equity fund, managed by Capricorn. While the region is taking a long-term approach these investments could also generate future profitable returns from exits – although, as with any equity investment, there are no guarantees. By the end of its current 2025/26 financial year the interest and capital returns are forecast to reach £30m and will be used for reinvestment purposes. However, the current overall cost associated with the botched Aberthaw procurement is money that can no longer be deployed to back the growth of businesses in the region – and potentially reinvested multiple times. The Aberthaw site will though continue to benefit from remediation tax reliefs. A Cardiff Capital Region spokesperson said: “As part of our mission to drive sustainable economic growth, Cardiff Capital Region (CCR) has developed future-focused initiatives to drive innovation and high-quality job creation across south east Wales. This includes the transformation of the former Aberthaw Power Station site into a flagship green energy park – an ambitious redevelopment that reflects CCR’s commitment to renewable energy, skills development, and new technologies. “A legal challenge was brought by an unsuccessful bidder following a procurement exercise for the demolition contract, which was awarded in 2023. Subsequently, CCR and its accountable body at the time, Cardiff Council , agreed a global settlement. CCR will indemnify Cardiff Council in respect of its related legal and professional services costs in the sum of £909,983. “These costs have been fully funded from commercial returns and interest accrued on capital balances, with no impact on core CCR programme budgets or any requirement for further public funding. The forthcoming independent review (by Deloitte) is examining the procurement process in full. Its recommendations will ensure that all issues have been identified and acted upon appropriately. “This matter does not affect the wider work of Cardiff Capital Region or the progress of the Aberthaw project. The remediation and transformation of Aberthaw is progressing at pace and is already generating significant interest from green technology and energy businesses across the UK and beyond.” The city region is confident – although this will ultimately be determined by the marketplace – that there is significant value, potentially running into tens of millions of pounds, from the pulverised ash cloud created when Aberthaw Power Station was operational. The 18 million tonnes of ash, which is 50 metres high, could be valuable in helping to reduce the carbon impact of concrete production. Several firms have been on site drilling holes to assess concentration of minerals. The site benefits from a rail head. A connection to National Grid would have to be re-authorised. Completion of the site’s remediation is still several years away. The intention is that any large-scale investment – including renewable energy projects and potentially small modular nuclear reactors – would be privately funded, although this could be alongside support from the UK Government, including from its new sovereign wealth fund. The city region became a statutory body last year. It has successfully secured innovation-focused funding from the UK Government and its backed agencies. Its most recent win was £30m from the UK Government’s Local Innovation Partnerships Fund. It will also deliver a £160m new investment zone for Wales. The funding , over five years, will be split across a number of sub-zones, including the proposed Cardiff Parkway mainline train station and integrated business park at St Mellons, on the outskirts of Cardiff. The zone will be financed by the UK Government. It has yet to determine how the Local Innovation Partnerships Fund backing will be deployed, but said businesses operating in the region – particularly in the eight sectors underpinning the UK Government’s industrial strategy (including tech and creative industries) – will play an active role in shaping it. Aberthaw is one of 27 projects backed by the city region’s City Deal, which was joint funded by the UK and Welsh governments.