Sailing: It's sport, but at €2 billion not as mortals know it

The dinners were private, held aboard their eye-poppingly expensive luxury yachts. The two men talking were both billionaires and the subject under discussion was revolution. An overthrow of the old and installation of the new. The conspirators were Ernesto Bertarelli, the Swiss pharmaceuticals chief, and Larry Ellison, the self-made boss of the Californian-based Oracle computer software giant.

Their sport is yachting, the regime under scrutiny the America's Cup, and, three years on, changes large and small have been the result. All nationality rules have been dropped, the defender has been racing with the challengers, the time-frame to find the ultimate sole challenger has been cut to six weeks beginning next April - and attempts to cut budgets have failed hopelessly.

Trivially, black is the favourite colour of more than half the new boats; significantly, billions will be spent on the 32nd America's Cup. The full extent of the makeover of an event with 155 years of history behind it will appear in the city of Valencia, better known for industry and oranges, next month with the first of this year's regattas.

Right now the heart of a new waterfront and harbour complex, just named Port America's Cup, is raw concrete and a permanent cloud of dust. With teams of builders working double shifts, the event is already bringing new jobs. The caterers and hotelkeepers are looking forward to a bonanza. Behind the brochure images and the glittering new team compounds a sporting event involving a truly staggering €2 billion (£1.4bn) is making its European debut.

Not everything has changed in the America's Cup. The paranoia is still rampant, the mega-buck egos will still be strutting down the dock trying to look like sporting superstars and the knife-fight to establish a winning advantage will be as vicious as ever - the 12 teams will spend a total of at least €600m (£415m).

It is in the organisational structure that the new wrinkles lie - a company owned by Bertarelli will promote and organise the event. Starting in April 2007, quick-fire Louis Vuitton Cup elimination races will cut the 11 challengers down to four semi-finalists in May. It will all be over, probably, by the end of June.

Winning the America's Cup means more than winning a trophy. It means winning control of the whole event. Now the new model will be tested. Will it produce a superior sailing event? Or will it have sacrificed too much on the altar of commercialism?

Among the most impressive of the team palaces is the one occupied by BMW-Oracle, and the prominent black-and-blue logo of the German car makers signifies a financial commitment second only to their backing of the Sauber Formula One motor racing team. If, after the last guest has left, the team have spent less than €200m it will be a miracle.

The host city has not been so lucky, and had to fight for money it thought would come from central government until a general election put a rival party in power in Madrid. Mayor Rita Barbera has lost nearly €200m of cash; loans may be underwritten but will have to be repaid.

Yet she will deliver to a city which used to turn its back on the sea a new park, new pride and a new social as well as sporting centre. A Foredeck Club, an idea which was spawned by the Oracle executive Tom Ehman in Auckland, has turned into a wondrous confection from British architect David Chipperfield and will become not just an event-long corporate facility but a lasting public amenity.

Bertarelli and Ellison may also have engineered the first major step towards turning 19th-century quaint into 21st-century chic.