International Public Partnerships Limited has announced that the Bazalgette Consortium comprising INPP, Allianz, Amber Infrastructure Group, Dalmore Capital Limited, DIF and Swiss Life Asset Managers has been appointed preferred bidder for the Thames Tideway Tunnel (“TTT”) licence.
INPP will invest up to £210m in the project, with the residual risk capital being funded by the remaining consortium partners. The Consortium will now work with the stakeholders, including Thames Water, the Department for Environment, Food and Rural Affairs and Ofwat (the UK regulator for water and sewage companies) to reach Financial Close/Licence award, which is expected in Summer 2015 and further details of INPP’s investment will be provided at that time.
The TTT project is one of the most significant UK infrastructure investment opportunities and possesses the following characteristics:
- A yielding investment through both construction and operating periods;
- A fully RPI-linked revenue stream;
- An investment grade rated entity that will be regulated by Ofwat;
- Strong protections to mitigate construction risks, including:
- Experienced management team, project manager and construction contractors already in place;
- Significant incentive arrangements under the construction contracts, Licence and stakeholder arrangements;
- A government support package which provides significant mitigation to the risks of construction; and
- Limited operational risks.
Project background
The TTT is a new part of the sewer network which will carry sewage and storm water discharges from the broader London sewerage system. The tunnel will be approximately 25km long, 7.2m in diameter and will run up to 65 meters below the River Thames. Starting in West London, the main tunnel will follow the route of the Thames to connect with the existing Lee Tunnel, with sewage being transferred to the Beckton Sewage Treatment Works in East London.
Construction of the estimated £4.2bn project (2011 prices) will be under three main contracts. The construction Preferred Bidders were announced in February 2015, with BMB JV (Joint Venture of BAM Nuttall Ltd, Morgan Sindall Plc and Balfour Beatty Group Limited) selected for the West contract, FLO JV (Joint Venture of Ferrovial Agroman UK Ltd, Laing O’Rourke Construction) for the Central contract and CVB JV (Joint Venture of Costain Vinci Construction Grands Projects Bachy Soletanche) for the East contract. Construction is expected to commence in 2016 and reach completion by 2023.
During construction, the TTT project will benefit from a bespoke regulatory framework that will allow it to start generating revenue when construction begins. Once fully operational, Ofwat will regulate the TTT project in line with other water and sewerage company’s regulatory cycles.
INPP consortium wins Thames Tideway project