A FLAGSHIP project to regenerate a Valleys village is heading towards a cash crisis, the Argus can reveal.

The £10 million scheme to regenerate Llanhilleth, near Abertillery, now needs £731,617 to be completed after extra works had to be carried out.

The funding shortfall sparked fears the new primary school, to replace Brynhyfryd and Ty'r Graig schools, could miss its target opening date of September 2004 - but Blaenau Gwent council says it will open on schedule.

The council's executive will discuss the issue tomorrow. Councillors are expected make a case to the National Assembly for the funding shortfall.

The main reason for the shortfall is that the school floor was under flood level in the original scheme. Raising it led to "abnormal" extra costs of £400,000.

The Environment Agency originally said the school was not in the flood plain, but this was reviewed and found to be wrong. Redesigning the building added £325,000 to the bill, and a different type of roofing material and roof shape added £200,000.

Of this £925,000 total, £193,383 will be met from scaling down other project costs - putting the funding shortfall at more than £731,000.

Council chief executive Robin Morrison said the first phase of the work is nearing completion, and he is confident construction of the next phase of works would be completed so the school could open on schedule.

"There is a funding issue with the scheme due to the introduction of the Environment Agency's more stringent requirements with regard to flood prevention measures since the scheme was conceived in 2000," he said.

"The shortfall in funding is being sought from the National Assembly and initial discussions have been held with the minister concerned."

Officers are recommending councillors tell contractors Laing O'Rourke to complete the school. The cash shortfall would then affect later stages of the project.

Blaenau Gwent AM Peter Law told the Argus he was taking the matter up with social justice and regeneration minister Edwina Hart immediately. "This is too important a project to be held up now," he said.

He added it was a relatively small amount of money compared to overall costs, especially as it was needed for public safety.

"Bearing in mind the history of flooding in Abertillery and Llanhilleth, it can't be a bad thing," he added.

* Pictured: Llanhilleth