The Council will lend money to the i360 to begin construction. The Council can borrow cheaply and lend at higher rates, so sees it as a money-making enterprise which might increase local employment and pay for rebuilding the arches. Council Loan: £36 million, Local Enterprise Partnership loan (LEP): £ 4 million, Equity investors: £6 million
- · The predicted level of use of the ride is 800,000 in the first year and 760,000 per year after that; these figures have been verified by respected, specialist consultants with a track record of predictive success. These figures are irresponsibly optimistic.
- · The level of activity required for the Council loan to be serviced is 380,000. This means there is a margin of safety of 380,000 (50%). (The break even activity level for the scheme as a whole is 400,000.)
- · The construction company will be Hollandia (which built the London Eye) and they have agreed a fixed price contract so the construction risk is with them.
- · The lift will be built and operated by Poma, a French company which specialises in cable drive lift systems. They have guaranteed 98% availability for the operation of the lift. This transfers a major area of operational risk to them.
- · The Council’s funding will be the last to be drawn down and will be paid in stages during the construction.
- · Revenue from the scheme will be allocated first to meet operating costs, but servicing of the Council loan will have the next call on it, ahead of the LEP and the equity investor.
- · The Council will have a first charge over the i360 site as well as “step in” rights if they judge that the scheme is not being managed appropriately. This of course is a double edged sword since if the scheme is a commercial failure the Council will become responsible for it and could end up liable for the cost of demolition; the step in right does also provide the opportunity to replace the operator if it is not being run well.