Can Battersea power station spark to life?

After 27 years lying derelict, the famous London landmark could be on the brink of a comeback. Alistair Dawber reports

It was no coincidence that Battersea Power Station was chosen by David Cameron to launch his general election campaign earlier this year, using the derelict former coal-powered site as the backdrop to press home his mantra that the Labour government was responsible for "Broken Britain".

It is 27 years since Battersea Power Station, one of the most recognisable landmarks of the London skyline, produced any electricity and retirement has not been kind to the building – the largest brick-built structure in Europe.

Since 1983, a number of companies have bought and sold the power station; all have failed to return the site to its former glory, giving up after being bound up in bureaucratic red tape, financing difficulties, or just plain daft ideas.

Today, Battersea Power Station is in a very sorry state. English Heritage has described the condition of the Grade II-listed building as "very bad", and six years ago the building was added to a list of 100 "most endangered" sites by the World Monuments Fund. The message from the then leader of the opposition was not a subtle one. Following previous plans to turn the site into a theme park, a concert venue, a Premiership football ground and a retail park, the latest company to try to transform the London landmark is Real Estate Opportunities (REO), which bought the power station four years ago for £400m.

The company, which is publicly listed on the London, Dublin and the Channel Islands stock exchanges, has grand aspirations, including plans to build 3,700 new homes, open 2.3 million sq ft of office space and develop a retail centre.

But how can REO succeed where others in the past have failed? There is no guarantee it will, but it is true that the group has made better progress than most, despite a number of setbacks. In August, REO failed to make an interest payment on an outstanding, unsecured loan, causing a financial headache that was temporarily resolved yesterday when it agreed a deal with a creditor, the Taiwanese property tycoon Victor Hwang, to defer principal and interest payments on £150m of loan notes until May next year.

Reaching a deal with Mr Hwang was a condition of REO's banks and Ireland's National Asset Management Agency, which agreed in August to extend loans of £263m for a year, in waiving breaches of their terms. "The agreement also confirms the basis of a wider compromise arrangement," the Jersey-based developer said in the statement.

The announcement is good news for REO and comes a few months after its managing director, Rob Ticknell, said it was seeking new investment from a host of possible investors for what it reckons will be a £4.5bn regeneration project.

"Battersea Power Station is our standout project but now we need a major international partner," Mr Ticknell said. "We have had lots of expressions of interest, from sovereign wealth funds, private equity firms and even some pension funds."

Last year, REO applied for planning permission for the site, an application that will be heard by Wandsworth Council in November. The project has already won qualified support from the Mayor of London, Boris Johnson, whose office described the plans as "encouraging".

Commenting on the project to develop the whole of what is known as the Nine Elms area of south-west London, of which the power station's regeneration is central, the Mayor said: "This key part of the capital is the biggest development opportunity remaining in London and the power station is one of London's much-loved historic landmarks. It is vital that we get the redevelopment of this site right."

Despite the encouraging noises from City Hall, the entire Nine Elms redevelopment project, including Battersea Power Station, rests on a deal to extend London Underground's Northern Line to the area.

On a website for New Covent Garden Market, which is also being redeveloped under the Nine Elms plan, Mr Johnson says: "Nine Elms will be quite possibly the most important regeneration story for the whole of London over the next 20 years. We want to use the opportunity of this fantastic new development to put in two new stations on the Northern Line."

The problem for REO and the rest of the redevelopment is that the Mayor is also on record as saying that the Tube extension will not be funded from the public purse, leaving REO and those responsible for redeveloping New Covent Garden Market and the new US embassy, which is expected to be completed by 2016, to foot the bill. "There has been significant progress on the plans to extend the Northern Line," says Mr Ticknell. "Last month, Transport for London signed off the plans, saying that the project was fit for purpose – it is a big step and shows that TFL is behind the plan.

"The Mayor is also behind the project and we think there would not have been the commitment of support from the authorities unless there was a real expectation that private financing could be found."

Nine Elms has been excluded from the new Crossrail levy, designed to pay for the major new railway running across London, with Mr Ticknell arguing that a new tax, specifically designed for the developers of the south London project, could easily be designed. Sources suggested yesterday that the project could be completed for between £450m and £550m.

REO says it has made progress in attracting a partner for the redevelopment, meeting an array of interested parties, but it could be all in vain if the extension to the Northern Line is not agreed. If the project does go well over the next five years, the Prime Minister might choose Battersea Power Station to launch his 2015 general election campaign, especially if Britain's economy is on the mend. He might even be able to take the Tube to get there.

The ups and downs of a landmark

1924 Proposals to build a coal-fired power station in Battersea are met with protests by local residents, and from the nearby Tate Gallery, which said the pollution could damage its paintings.

1933 Battersea A Power Station, the first of two identical stations to be built at the site, starts producing electricity.

1953 Battersea B Power Station opens after being delayed by war.

1964 Problems lead to widespread power failures across London. The outage delays the launch of BBC Two.

1965 Part of The Beatles' film, Help! is shot at the power station.

1975 Battersea A Power Station is decommissioned.

1983 Battersea B Power Station is decommissioned. The site is bought by a consortium, including Alton Towers, which plans to open a £35m indoor theme park. The project collapsed in 1989 after the cost jumped to £230m.

1990 The plan is changed to turn the site into flats and shops, but no work takes place for three years.

1993 With £70m debts, the power station is sold to Hong Kong development company Parkview for £10m.

2006 Parkview sells the station to REO for £400m. REO's planning application to turn the site into flats, shops and office space will be heard next month.

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