Financing for the UK’s £4.2bn “super sewer” gets go ahead

Investors in the Thames Tideway Tunnel include Allianz, Dalmore, DIF and INPP.

London’s Thames Tideway Tunnel (TTT) this week received a significant boost when Ofwat, the country’s water regulator, awarded a licence to own, finance and deliver the £4.2 billion (€5.8 billion; $6.6 billion) project to the winning consortium.

The move, foreshadowed by the designation of Bazalgette Tunnel as preferred bidder in July, opens the way for construction to start next year.

The chosen team to fund the scheme comprises Germany’s Allianz; UK-listed International Public Partnerships (INPP), through its adviser Amber Infrastructure Group; London-based Dalmore Capital; and Dutch-headquartered DIF.

How much each party will contribute is not known but INPP said it was investing £210 million in the project, equivalent to a 15.99 percent stake, implying an overall equity cheque of about £1.3 billion. The Pensions Infrastructure Platform, a co-investor alongside Dalmore, also said it was committing £370 million to the project.

TTT will also receive liquidity from a raft of banks including Royal Bank of Canada, Lloyds Bank, Credit Agricole, SMBC, BTMU and Santander. The senior debt has been rated Baa1 by Moody’s.

Popularly dubbed the “super sewer”, the project also involves a yielding investment through construction and operation, a fully Retail Price Index (RPI)-linked revenue stream, and, according to a statement issued by INPP, a government support package providing “significant mitigation to some of the more severe risks of construction”.

TTT is part of a sewer network that will carry sewage and storm water discharges from the broader London sewerage system, effectively replacing the river Thames, as INPP puts it, as the “sewer of last resort”.

The tunnel, which will be about 25 kilometres long and 7.2 metres in diameter, will run up to 65 meters below the river. Its construction is expected to complete by 2023.