London's water utility invited international investors on June 10 to help finance, through a newly created special-purpose company, the estimated $7-billion tunnel program that will prevent polluted storm overflows from tainting the River Thames.
Work on the 25-kilometer-long tunnel is due to start in 2016, subject to final government approvals that are expected this fall.
Privately owned utility Thames Water already has short-listed construction bidders for three construction packages covering the whole project. It aims to announce the successful bidders and the financing deal early next year.
While Thames Water is promoting the project through its subsidiary Thames Tideway Tunnel Ltd. (TTT), the government and the Water Services Regulation Authority—known as OFWAT—have agreed to have the scheme procured by a stand-alone "infrastructure provider" (IP).
The IP will be required to invest around $1.7 billion in equity and raise the balance through loans of various sorts.
However, because the project is perceived as potentially risky, the government has agreed to offer the IP some financial guarantees to provide comfort to lenders. "We've already had a lot of interest from investors," notes Mike Gerrard, TTT's managing director.
The proposed tunnel will run from Acton, in the western part of the city, to Abbey Mills pumping station, which is close to the east London site of the 2012 Olympic Games. From there, it will flow along the Lee Tunnel, now being built, to the Beckton sewage treatment plant.
With diameters ranging from 6.5 meters to 7.2 m, the tunnel will follow the River Thames over 60 m below its bed in places.
To build the tunnels, TTT has divided work into contracts covering the east, west and central sections; the contracts have a combined value of up to $3.9 million. The company last year short-listed a number of international joint ventures to bid for each contract.
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Those competing for the central package include the Bam Nuttall, Balfour Beatty, Morgan Sindall JV; the Costain, Vinci and Soletanche Bachy JV; the Ferrovial Agroman-Laing O'Rourke JV; and a JV of Sweden-based Skanska, Germany's Bilfinger and France-based Razel Bec.
The east package bidders are the Bam Nuttall, Balfour Beatty, Morgan Sindall JV; a team of U.S.-based Bechtel and Austria's Strabag; the Costain-Vinci-Soletanche Bachy JV; a team of Germany's Hochtief and U.K.-based Murphy; and France's Bouygues Travaux Publics.
Thames Water is controlled by Kemble Water International Holdings, which includes private and state investors from China, Australia, Singapore and Abu Dhabi.
The company early this year hired Andrew Mitchell as chief executive of TTT. He had been program director on London’s large Crossrail tunnel project, now at peak construction.
