3. Will the First Minister make a statement on the announcement this morning of Welsh Government capital funding for the Swansea Bay Tidal Lagoon? 99

I thank the Member for the question. In a letter to the UK Government before Christmas, the First Minister indicated that the Welsh Government is prepared to consider an equity or loan investment in the Swansea bay tidal lagoon if that would enable the project to move forward by reducing the cost of capital.

Thank you for that answer. I was hoping you might give me a little bit more on that, but that leaves me more questions to ask. We've just heard, via the press, just about quarter of an hour ago, actually, that the substantial sum seems to have been identified at somewhere between £100 million and £200 million. I'm wondering if you could confirm that in your reply to this, but, if it is at those figures, that is a substantial sum—not exactly down-the-back-of-the-sofa material. Perhaps you could tell us where you're likely to be getting that kind of money from, if, as Plaid Cymru suggests, your capital borrowing pot, if you like, is pretty much committed to the M4. So, perhaps you can give us some clarity on the type of figure that you're considering and where that money will be coming from. And that is material, because the—. If I read from the letter correctly,

'This investment could help to reduce the cost of capital for the project and hence reduce the subsidy requirement over the lifetime of any contract for difference.'

So, with such a figure, we'd need some reassurance that it would actually be likely to make a difference to the strike price and the term of the deal. So, what assessment have you done to determine the effect of the capital that you're likely to be able to put in on the strike price and the length of the repayment deal?

And then, finally, on what disclosable terms are you at this stage able to say that you would like to see any such loan or equity deal being made? We already know that the loan taken up by the company—I think from 2015—is unsecured. And, while I don't want anyone to be in any doubt about my support for this, for the tidal lagoon, we've also got a duty to constituents to make sure that any investment is adequately protected. So, if you are able to give us some sort of indication of the protection that you would wish for Welsh investors—sorry, the Welsh Government—on behalf of the public in Wales, what kind of protection would you be looking for in any further deal?

Llywydd, let me be clear that the First Minister's letter to the Prime Minister on 6 December was designed to try and unlock the UK Government's inability to do the right thing and to announce that it is taking forward the conclusions of the Hendry review, and to allow the Swansea bay tidal lagoon project to proceed. In order to try and create movement in this position, the First Minister made it clear that we were prepared, in the right circumstances, to consider a substantial equity and/or loan investment. I'm not going to be able to provide the Chamber with specific figures this afternoon because that figure would depend crucially on the UK Government coming forward with an offer on the strike price. Those two things are interlocked with one another, and I can't give you a sensible answer on the first leg of such an arrangement without knowing what the UK Government was prepared to offer on the second.

But Suzy Davies is right to say that what we were trying to do was to create progress on two fronts. We were prepared to put money forward in order to help with the cost of construction of the tidal lagoon. If that's what's stopping the UK Government from coming forward, then we were offering to be part of a solution to that difficulty. But, by being willing to put forward capital for the construction of the project, we would also lower the long-term cost of borrowing involved in the project, and that should allow the UK Government to be in a better position in coming forward with an offer on the strike price. It would be lower as a result of the lower borrowing costs involved. So, our offer managed—we thought—to have an impact on both scores. It is very disappointing that the First Minister has had no reply of any sort to his letter of 6 December.

I want to be clear, Llywydd, with the Chamber, that, when the First Minister sent his letter, he deliberately decided not to draw attention to it. He wanted to make sure that the Prime Minister had the offer in a way that couldn't be vulnerable to suggestions that it was just there for political point-scoring, or that it was there to embarrass the Government in any way. He wrote in terms that would have allowed the Prime Minister—. If there was any genuine intention on the part of this Government to come forward on the tidal lagoon, it would have given her every opportunity to have done that. The letter is only in the public domain now because we are a month on from when it was written, we are days away from the anniversary of the Hendry review, and here's the offer that the Welsh Government is willing to put on the table. We really think that it is time for the UK Government to move forward in the way that parties across this Chamber—I'm not making it up at all—parties across this Chamber have urged the UK Government to do so. We are showing our willingness to help solve some of the barriers that there may be in the UK Government's mind to making this very necessary and important decision for Wales.      

Can I warmly welcome the Welsh Government's action? I don't think it's possible to overestimate the importance of the tidal lagoon to the Swansea bay city region. I know that there is support from Members right the way across this Chamber for the tidal lagoon, and Members I disagree with on virtually everything else are in total agreement about how important this is to Swansea and the Swansea bay city region. 

If Swansea is the first, then we develop the design skills, we develop the technical skills, we develop the supply chain. That means we will develop a whole industry, and people who want to develop tidal lagoons afterwards will be coming to Swansea, just like Aarhus and places in Germany did with wind turbines. Isn't it really one of the most important things that could happen? Does the Cabinet Secretary agree that we really do need to be the first to develop these skills and develop the industry and help answer some of the questions that Russell George was asking earlier?

Well, Llywydd, Mike Hedges sets out exactly the arguments that persuaded the Hendry review. The Swansea bay tidal lagoon is not simply about Swansea. It is about creating the knowledge that is needed for us to be able to do more in the future to use the power of the sea to help us to create the sustainable energy that we need. The investment in Swansea is part of that whole learning experience. It allows us to be the first in this field to build up all the things that go alongside, having tested that proof of concept. That's why it's so important to Wales. That's the case that their own appointee, their own previous Minister, Charles Hendry, tested and concluded was sound. That's why he urged the UK Government to get on and make the necessary investment, and 12 months later here we are, still trying to roll that stone uphill. 

Can I first declare that I'm a community investor, as many hundreds of local people are, in this scheme? I do that because many people in the Swansea bay area think that this is the future, not just for Swansea bay, as you say, but for energy around the Welsh coast as well. There's much to be gained from it. 

I very much welcome the actions by the First Minister. I appreciate how the Cabinet Secretary has set out why this was done, confidentially, a month ago, though I have urged the First Minister to do this in the past. I think that, in effect, what the Welsh Government has done is call the bluff of the Conservatives in London and said 'It's time for you either to stump up or say that you're not interested in tidal technology for the future of energy production, not just in Wales but throughout the UK as well'. If they do that, of course, they will be putting the UK at the back of a technology that is going to take off exponentially, driven by China and countries like Canada. But we can be at the forefront of that. 

Now, I understand why you don't want to talk about the sums, but you have talked about substantial sums, which is why it's so shocking that you haven't had a reply to the letter from the First Minister to Theresa May. But what I'm really interested in is the type of investment at this stage, because the sum is not so important from the Welsh Government's point of view. It does open the door, of course—I understand that—but from the Welsh Government's point of view and from our public interest point of view, what kind of investment the Welsh Government might be interested in is important. A simple loan, which is paid off because there's an income stream from the tidal lagoon, does not put us, perhaps, in a position where we can take the most advantage of this technology as it develops. An equity stake in the holding company, of course, allows us to be there as the technology develops, and not only as this project develops, but as other potential projects also develop.

I very much urge the Government to consider, if this does come to fruition, to take a much more proactive role in that equity stake, rather than a simple loan, or loan guarantee, or some other arrangement around construction that just makes the figures easier. Because this is our opportunity. Other major capital investments you've made, such as Cardiff international airport—this is your opportunity to be there, and to be there for a long period of time. So are you able, if not to state the size of the offer made, at least to state what type of offer you're interested in and whether you've discussed with Tidal Lagoon plc how this might be actually achieved?

Llywydd, the letter to the Prime Minister from the First Minister kept the door open on a range of different ways in which our systems could be brought forward, including equity investment, but also loan possibilities as well. Llywydd, I want to just stress to the Chamber how serious an offer this was, and the discussions that lay behind it, between myself as the finance Minister and the First Minister. It was not an offer made off the cuff, because our hope was that this would have unlocked the position, and that our offer would have genuinely been drawn down. As your finance Minister, I had to feel satisfied that I would be in a position to be able to offer that assistance at a time when, as Members here will know, all our budgets are under pressure, and there are many very important calls on our ability to provide capital investment right across the Welsh economy. 

So, I guess Simon Thomas would not be surprised to know that, from the finance point of view, finding figures that we could meet easily is not something that I could afford just to push to the margins of my consideration. But, I did feel, having gone through it all very carefully with senior officials here, with the First Minister as well, that had the Prime Minister responded and responded positively to our offer, we were in a position to back up our offer with investments of different sorts, depending on the deal that could have been done, and we would have thought carefully about the points that he has made this afternoon and has made previously about what an equity investment in the project might have provided for Welsh taxpayers but also for the future of this very important industry in Wales.

Thank you, Cabinet Secretary.