Future of power station project is now 'guaranteed' after costs spiral
Battersea Power Station is to be sold for a record £1.6 billion after the spiralling cost of restoration threatened the future of London’s flagship regeneration project.
The proposed deal, announced on the Malaysian stock exchange this morning, would make the Grade II* listed former generator the most expensive building ever to change hands in Britain, dwarfing the £1.3 billion paid for the “Walkie Talkie” City skyscraper last year.
The complex transaction will see ownership of the building — but not the surrounding 42 acres of land — transfer from the Malaysian consortium that owns the development company to two huge Malaysian government-backed investors.
The surprise move comes after the costs of transforming the crumbling riverside brick structure into an office, shops and apartments complex — including Apple’s new London HQ — soared from an initial forecast of about £750 million.
The huge technical challenge of stripping out far more asbestos than expected, combined with soaring constructions costs — much related to chronic shortages of skilled workers — have added costs and in addition extra features such as an energy centre and a basement have added to the budget.
The projected profit return on the scheme had already been cut from 20 per cent to 8.2 per cent.
Today the developers insisted that the sale would put the future of the world’s most famous industrial building on a secure long-term financial footing, and guarantee that its restoration is completed.
A spokesman for the Battersea Power Station Development Company said: “This announcement is a tremendous show of faith and means that this iconic London landmark will be maintained for future generations to enjoy long after its restoration is complete.”
The coal-fired generator stopped heating, lighting and powering London homes and businesses — including Buckingham Palace — in 1983 after a 50-year operating life.
The complexity and cost of restoring the building defeated three previous owners before it was sold to a Malaysian consortium in 2012 for £400 million. The current plan is the seventh to have been drawn up since the power station’s cavernous boiler room went cold.
Its next owners are the Malaysian asset management group Permodalan Nasional Berhad, and the private-sector workers pension fund Employees Provident Fund of Malalysia (EPFM).
They are already 70 per cent owners of the overall project through shareholdings in the development company, which is owned by two Malaysian property companies Sime Darby and SP Setia, as well as EPFM.
They have agreed to pay about 1,000 times more for the building than the original purchaser, theme park entrepreneur John Groome. He handed over £1.5 million for it to the Central Electricity Generating Board in 1987.
The purchase price is expected to be paid in phases as the work on the power station is completed. They will fund the later phases of the £9 billion riverside project up to its completion in 2028.
Work on the power station building itself will be finished by the end of 2020, when about 1,400 Apple workers will move into their new London home.
There will also be a shopping mall, a giant food hall, an events space with capacity for 2,000 people, and 253 apartments including spectacular penthouses perched on the roof of Sir Giles Gilbert Scott’s masterpiece.
In its statement to the Malaysian stock exchange Sime Darby said the sale “would provide increased certainty of investment return ... than would otherwise be the case and would enable both parties to focus on securing the development profit and investment returns from the remaining development in Phases 3 to 7 of the Battersea Power Station project which is estimated to be completed in 2028.”
The spokesman for Battersea Power Station Development Company said: “The proposed transaction reflects the shareholders long-term commitment to Battersea and London.”
