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The Bazalgette consortium has received the license from OFWAT, the UK regulator for water and sewage companies, to finance the construction of the Thames tideway tunnel (TTT) project.
Bazalgette team, composed of International Public Partnerships Limited (INPP), Allianz, Amber Infrastructure Group, Dalmore Capital Limited, DIF and Swiss Life Asset Managers, has worked with the stakeholders, including Thames Water, the Department for Environment, Food and Rural Affairs and Ofwat to reach this Financial Close & Licence award.
A total of six banks have provided senior debt to the project, including Royal Bank of Canada, Lloyds Bank, Credit Agricole, SMBC, BTMU and Santander. The debt on the project has received a rating of Baa1 by Moody's.
The total project investment is estimated at £4.2 billion (US$6.59 billion). INPP has announced it has committed to invest up to £210 million and has a 15.99% stake in the project. The remaining risk capital is being funded by the consortium partners. The project has a design life of 120 years and is expected to provide yield to its investors for the whole of this period.
The TTT is a new part of the sewerage network which will carry sewage and storm water discharges from the broader London sewerage system. It will be a 7.2 metre diameter 25 kilometre sewer tunnel running up to 65 metres 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.
In July Thames Water selected the Bazalgette consortium as the preferred bidder for the project. Construction of the project will be under three main contracts. The preferred bidders for construction were announced in February 2015, with:
Construction is expected to commence in 2016 and reach completion by 2023. The project is expected to reduce the approximately 39 million tonnes of untreated sewage that is currently discharged into the tidal River Thames in a typical year.
We have recently reported on several PPP projects in the UK: