DEPARTMENT FOR
CULTURE, MEDIA AND SPORT News Release (078/09) issued by COI News
Distribution Service on 13 May 2009
Olympic programme
remains on budget - £324m investment in village but overall cost
forecasts across programme fall by £179m
The Government and the Olympic Delivery Authority (ODA) today
announced that £324 million of the Olympic budget would be
invested in the Olympic Village.
A private sector deal from Lend Lease and its banking consortium
was on offer. However, since last summer the economic climate has
worsened considerably, requiring the public sector to carry an
increased level of risk. Ministers have decided that the Lend
Lease deal is not in the best interests of the taxpayer and that
it would cost more public money in the long term.
Over the medium to long term as the market improves the ODA will
seek private investment for the Village on terms more favourable
to the taxpayer.
With the Olympic Village now publicly owned, the public sector
will receive returns from sales after the Games. All of the
additional £324 million public investment being made today from
contingency and savings is expected to be returned after the Games
when the flats are sold.
Today's decision means that nearly a third of the way
through the programme, just under £1.3 billion of the £2 billion
of the contingency fund available to the ODA remains unspent.
It was also confirmed today that, as planned, agreement has been
reached in principle for a further £268 million to be invested
into the Village through the pre-sale deal for affordable housing
with Triathlon Homes. This funding is separate to the Olympic budget.
The Government also published new figures that show that due to
cost savings and good management, the forecast total cost of the
ODA's Olympic programme has been reduced by £179 million.
Taking account of expected receipts from the Village the current
forecast for the Anticipated Final Cost (AFC) of the ODA programme
is now £7,234 million.
Minister for the Olympic and Paralympic Games Tessa Jowell said:
"After careful assessment it is clear that investing in the
Olympic Village now will save public money in the long term.
"A private sector deal was available, but because of the
credit crunch it was not a good deal. By funding the entire
project the Village will become publicly owned and the public
purse will receive substantial returns from sales. The ODA will
make a fresh assessment of the market nearer to completion with a
view to pursuing deals with other possible investors."
"A third of the way through construction there remains
nearly £1.3 billion of contingency left. Forecast costs have come
down and the overall budget of £9.3 billion remains unchanged. It
will not be exceeded. "
Olympic Delivery Authority
Chairman John Armitt said:
"We recognise the substantial progress made by Lend Lease
and the consortium in the last six months.
"The Olympic Village will provide excellent accommodation
for the 17,000 athletes and officials during the Games. The high
quality development will also provide much needed new housing for
east London capable of delivering significant returns to the
taxpayer after the Games.
"The majority of contingency used to date has been for
projects affected by the economic downturn - the Village and the
IBC/MPC. Contingency required for other projects has been more
than offset by savings elsewhere.
"Nearly £1.3 billion is left unreleased in contingency, the
public sector owns a world-class asset and we remain on track to
complete on time and within budget."
Village deal: Due to the credit crunch and the downturn in the
property market it has not been possible to fund the Village
completely with private investment as originally planned. Previous
releases of contingency (£326 million) have kept progress on site
on track over the last year.
Following a competitive tender process the ODA has been in
discussions with developer Lend Lease about private sector
investment in the Village development. Lend Lease has already been
appointed construction and development manager and this remains unchanged.
A private sector deal from Lend Lease and its banking consortium
was on offer. Lend Lease and its banking consortium were prepared
to invest up to £150 million in equity, involving a return to Lend
Lease, and £225 million of bank debt to finance part of the
construction and development costs.
However, since last summer the economic climate has worsened
considerably, requiring the public sector to carry an increased
level of risk on the deal. Ministers have decided that this not in
the best interests of the taxpayer.
Over the medium to long term as the market improves the ODA will
seek private investment for the Village on terms more favourable
to the taxpayer.
With the Olympic Village now publicly owned the public sector
will receive returns from sales after the Games. At least all of
the additional £324 million public investment being made today
from contingency and savings is expected to be returned after the
Games when the flats are sold.
The £324 million is being funded from within the Olympic budget.
Of this £261 million comes directly from the contingency fund
while £63 million is from savings made elsewhere on the programme.
It was also confirmed today that, as planned, agreement has been
reached in principle that a further £268 million will be invested
into the Village through the pre-sale deal with Triathlon Homes
for the affordable housing element. This funding is separate to
the Olympic budget and made up of grant from the Homes and
Communities Agency (HCA) and lending from a private sector banking
consortium on commercial terms.
This means the funding for the Village has now been secured. The
total cost of the village, including £147 million of post games
development costs, can now be confirmed as £1,095 million. This
will be funded as follows:
* £650 million of public investment
* £268 million of funding
for social housing
Receipts from the sale of private units will meet the balance of
development costs, including post-Games conversion of the
athletes' flats into homes for sale, and are also expected to
at least repay the additional public sector investment of £324
million agreed by the Ministerial Funders' Group in May 2009.
Construction work on the village started on schedule last June
and is on track with building now underway on six out of the
eleven residential blocks.
Quarterly economic update: The Government also published the
first of its planned Quarterly Economic updates .The key points are:
* £179 million reduction in overall cost forecasts. Within this
over a £100 million of realised savings made across the programme
including from utilities, structures, bridges and highways.
* Taking account of expected receipts from the Village the
Anticipated Final Cost (AFC) for the ODA programme is now £7,234 million
* The majority of contingency used to date has been for projects
affected by the economic downturn. Contingency required for other
projects has been more than offset by savings elsewhere;
* More contingency available than assessed risks. After the
resolution of Village funding £1,288 million, over 60%, remains
unallocated in contingency funding;
* ODA latest estimate is that they require £703 million of this
remaining contingency;
* There are 4,101 People currently working for contractors on the
Olympic Park;
* The ODA and the London Organising Committee of the Olympic and
Paralympic Games (LOCOG) expect to award around 7,000 direct
contracts worth around £6 billion, creating around 75,000 business
opportunities along the supply chain.
* The programme remains on track to finish on time and within budget.
Notes to Editors
1. A copy of the report is available on the DCMS Website http://www.culture.gov.uk/reference_library/publications/6152.aspx
2. Design and construction images of the Olympic Village can be
downloaded from: http://mm.gettyimages.com/mm/nicePath/locog?nav=pr124264390
3. Decisions to release contingency funding are made by the
Ministerial Funders' Group. This is Chaired by the Chancellor
of the Exchequer (Alistair Darling), and also consists of the
Chief Secretary to the Treasury (Yvette Cooper), Minister for the
Olympics (Tessa Jowell), Secretary of State for Culture, Media and
Sport (Andy Burnham), Secretary of State for Communities and Local
Government (Hazel Blears) and Secretary of State for Transport
(Geoff Hoon). The Mayor of London attends but is not a member.
Olympic Delivery Authority Press Office: 020 3 2012 700
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