Cardiff Council is still confident that working with Live Nation the 16,500 capacity arena which will be build on the Red Dragon site after its demolition, will still be built even though its now expected to cost £100million more than first thought
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Cardiff Council have been itching to deliver a new indoor arena for the city, especially after plans of removing the dated Motorpoint Arena (CIA) for the new ‘Canal quarter’ apparently being a the missing link in the capital’s entertainment infrastructure.
In 2020 it was announced one of the world’s leading sector operators, Live Nation, as its preferred partner to deliver a new 16,500 capacity arena in Cardiff Bay.
Cardiff City council originally planned to raise around £170m in long term repayable finance through the UK Government’s Public Works Loan Board (PWLB) and having Live Nation enter into a 40-year plus rental agreement covering the Councils borrowing costs.
The new estimate has soared to around £270m from the original £170m due to the current economic issues the country is facing, The project is not unique in facing rising costs, with schemes like South Wales Metro electrifying their lines to and from the Valleys.
The council and Live Nation are now looking at ways to bring costs down, by revisiting the design and infrastructure of the project, but with its capacity remaining the same.
Assuming the cost can be reduced by say £20m that would still leave a funding shortfall of around £80m with the council, set in the context of its overall lending with the PWLB – not looking to increase its exposure.
The current cost of fixed rate borrowing for 40 years is 4.95%. The council has the flexibility to borrow say over a two-year period and seek to refinance for the long-term with the hope that by then rates could fall further.
Cardiff Council and Live Nation declined to comment at this stage.