News story

New projects pass ‘first hurdle’ to secure government guarantee for infrastructure

Energy, road and rail projects worth £33 billion pass 'first hurdle' in getting a government infrastructure guarantee.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Wind farm

Energy, road and rail projects worth £33 billion have passed the first hurdle in getting a government infrastructure guarantee Chief Secretary to the Treasury, Danny Alexander has announced today (21 October).

Forty projects are now at the stage known as pre-qualification, meaning that they are eligible for the UK Guarantee scheme. Over half that have pre-qualified are energy projects, helping ensure that Britain develops a sustainable future energy supply.

While further discussions, assessment and due diligence remain, the move could see them secure government agreement to act as a guarantor for a project, giving private lenders confidence that they will get their money back if the project cannot pay. If the government gave a guarantee it would be for a proportion of the capital value of the project, and the scheme is authorised to issue up to £40 billion of guarantees in total.

Of the £40 billion of guarantees available, the government has already awarded a £75 million guarantee to power plant Drax for their £700 million programme to partially convert the UK’s biggest coal power station to biomass. The power station will produce 7% of the UK’s electricity with the biomass conversions set to be up and running over the next 3 years.

Infographic on the UK guarantees process

17 of the pre-qualified projects have agreed to be named.

The new pre-qualified projects named today are:

  • Helius Energy - Avonmouth biomass energy generation is a 100MW capacity facility in the South West expected to produce energy for the national grid, costing around £300 million to construct and creating approximately 450 full time jobs during the construction phase
  • Islandmagee gas storage project in Northern Ireland worth £400 million which will be capable of storing up two month’s worth of Northern Ireland’s total gas requirement
  • two Intergen gas-fired power generation projects at Spalding in Lincolnshire and Gateway Energy Centre in Essex, the latter being an investment of £600 million
  • Countesswells mixed use development in Aberdeen, Scotland which will see 3000 new homes built alongside business spaces and retail outlets
  • Neart Na Gaoithe 450MW Windfarm in the outer Forth Estuary, Scotland
  • Able Marine Energy Park, a port facility to support the manufacture, assembly and installation of offshore renewable technologies on Humberside
  • Chinook Energy plants, producing renewable energy from waste at sites around the UK
  • Gasrec, a producer and distributor of new, low carbon Bio-LNG fuel for UK commercial vehicle fleets
  • University of Roehampton campus redevelopment in South London
  • Tilbury Green Power 60MW waste wood fired power generation plant in Essex
  • relocation of University of Northampton from its current campus into Northampton Enterprise Zone
  • Five-Quarter Energy plant to process unconventional gas extracted from below the North Sea to create low-cost energy for British manufacturing and new jobs in the north-east of England
  • Ineos Grangemouth Ethane Plant near Falkirk, Scotland– a project to build ethane importation and storage facilities
  • Eggborough Power Limited conversion of coal-fired power station to biomass

Already announced as pre-qualified:

  • Northern Line Extension – UK Guarantee will be provided to support up to £1 billion of borrowing by the Greater London Authority for the Northern Line Extension to Battersea scheme
  • Mersey Gateway – a guarantee to support the construction of a bridge to relieve congestion and improve road transport links in the north-west of England
  • Hinkley C nuclear power – the first new nuclear power plant to be built in Britain in a generation, a £16 billion investment

The guarantees are one option for projects to use when financing themselves - many are also in discussion with private lenders. The pre-qualification means that should efforts to secure private finance fail, the government is there to help. Government guarantees are offered on commercial terms so involve a fee which is based on the riskiness of the project.

Chief Secretary to the Treasury, Rt Hon. Danny Alexander MP said:

Getting our infrastructure right means we can be globally competitive, boost growth and create jobs across the UK. What we see today is the extent to which the government is reaching out to help the private sector build Britain’s key infrastructure.

Having passed the first hurdle these companies know the government is there to help if they need it. I hope today’s announcement will encourage even more businesses to consider how they can take advantage of a guarantee.

The scheme is open to major infrastructure in sectors such as energy, transport, communications, waste and housing that are seen as growth boosting projects that will help support the local and national economy.

Published 22 October 2013