The Pump House at North Dock will be converted into a restaurant
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New developments will not be allowed to open at a £200m waterfront scheme until its sewerage network is upgraded.
Developers at Llanelli, including rugby stars Dwayne Peel and Stephen Jones, who have plans for a restaurant, have been told it will take two years.
There are concerns about sewerage entering the sea after heavy rain as the existing system is near capacity.
Llanelli Waterside is a 100-acre regeneration scheme with plans for a luxury hotel, offices and homes.
Carmarthenshire Council's planning committee was told construction could continue but developments could only be occupied once the upgrade is completed.
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The authority has recognised concerns expressed in terms of the water quality in the Burry Port inlet
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A joint project between the council and Welsh Assembly Government, it aims to create up to 1,500 new jobs, provide 1,000 new homes, 340,000 sq ft of business and office space and 180,000 sq ft of leisure development.
Welsh Water told the council improvement works to a sewage pumping station and the town's treatment works are due to begin next month and are scheduled for completion in March 2010.
Ryder Cup
Bendigo 9-10, a company backed by Grand Slam winners Jones and Peel, has been granted planning permission to transform the Grade II listed Pump House at North Dock into a restaurant.
But a condition was imposed that meant it could not open for business until after the upgrade.
At the same meeting a similar condition was imposed on a new large office block approved for land at nearby Delta Lakes, to be built by WRW.
A planning application is expected shortly from a hotel chain looking to develop a site near Machynys Golf Course in time for the Wales 2010 Ryder Cup, which will be held further east, in Newport.
Rugby stars Stephen Jones and Dwayne Peel have united in business
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A council spokeswoman said: "Carmarthenshire Council has approved a number of developments in the south Llanelli area, which is a clear indication that the authority's regeneration strategy is effective.
"However, the authority has recognised concerns expressed in terms of the water quality in the Burry Port inlet, including conditions recommended by the Environment Agency and Dwr Cymru [Welsh Water].
"These conditions prevent the beneficial use of any buildings until March 2010, which is the date Dwr Cymru has scheduled for completion of the improvements at the treatment works.
"Construction of the buildings can commence in the interim period."
Welsh Water said studies showed the need for remedial work which is due to begin in May, and further investigations into the network were continuing.
A spokesman for Environment Agency Wales said while the network was able to cope with the waste from existing businesses and households there was a capacity problem which meant at times of heavy rainfall diluted sewerage had been washed into the estuary.
He said the agency had asked the council not to allow any development that would add to the problem and the conditions imposed "seemed sensible" in the circumstances.
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