A £100MILLION European loan will make the contract for the Borders Railway Project “extremely attractive”, according to Scottish Borders Council leader David Parker.
Scottish Government Transport Minister Keith Brown announced the loan for the £300m scheme on Tuesday and said it will “maximise value for money and secure savings for the public purse”.
Mr Parker says the agreement will reduce the financial risk for the two consortia looking to secure the construction contract.
He told TheSouthern: “The announcement that the European Investment Bank (EIB) is prepared to provide the loan of £100m for the Borders railway is fantastic news. It represents another significant commitment towards the project and clearly demonstrates that it has a sound basis for progressing.
“The loan will be extremely attractive to the private sector consortia, and it is another major step forward in putting in place the funding package needed for Borders Rail.
“It is also further evidence that the scheme is sound and that people are willing to invest in it because of its long-term future prospects, which in my view are strong.”
The EIB will offer the loan to the winning bid by either BAM UK – who built the Stirling to Kincardine line – or IMCD, which comprises building giant McAlpine, Spanish rail firm Iridum Concesiones de Infrastructuras and Carillion Construction.
The New Borders Railway consortium dropped out after the withdrawal of American rail company Fluor.
Railway critic, Borders Party councillor Nicholas Watson, questioned why the project was deemed eligible for a loan when many private companies are unable to borrow cash.
Mr Watson said: “I can’t help contrasting this huge loan for a project based on sweeping rhetoric and a dodgy business case with the many businesses who have strong business cases but find it so hard to get finance.
“If the project does go ahead, it will effectively be underwritten by the Scottish taxpayer, so the European Investment Bank isn’t exactly taking a punt.”
Mr Brown said the loan demonstrated the EIB’s confidence in the project’s economic and social benefits.
He added: “This loan agreement with the EIB is further acknowledgement that the re-established railway will act as a catalyst for economic growth and inward investment in Midlothian and the Scottish Borders.
“This agreement will secure savings for the public purse by enabling the successful bidder to secure more economical finance, reducing the overall cost of the project.
“By bringing rail services back to the Scottish Borders over 40 years after they closed, we are demonstrating this Scottish Government’s commitment to South Scotland and the Borders Railway, as well as delivering sustainable economic growth.“
Transport Scotland said the loan was not critical to delivery of the project – still expected to be running in 2014 – despite now funding a third of the up-front costs.
Simon Brooks, EIB vice-president, send a team to visit the project last October to ensure eligibility. He said: “We congratulate Transport Scotland on successfully completing this stage of approval and look forward to finalising negotiations.”