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INPP, Allianz among preferred group for Thames Tideway

The winning consortium for the £4.2bn London “super sewer” also includes Amber, Dalmore, DIF and Swiss Life.

The Bazalgette consortium has been named preferred bidder for the £4.2 billion (€5.9 billion; $6.5 billion) Thames Tideway Tunnel (TTT) licence. The grouping will own, finance and deliver the project.

The consortium comprises: London-listed fund manager International Public Partnerships Limited (INPP); Amber Infrastructure, the adviser to INPP; Allianz Capital Partners, the alternatives investment arm of German insurer Allianz; UK fund manager Dalmore Capital; Dutch fund manager DIF; and Swiss Life Asset Managers, the asset manager of insurer Swiss Life Group.

In a statement, INPP said it would be investing £210 million in the project and said the consortium would work with stakeholders including Thames Water, the Department for Environment, Food and Rural Affairs, and water and sewage regulator Ofwat to reach financial close this summer.

The project, which has been popularly dubbed the “super sewer”, comprises: a yielding investment through construction and operation; a fully Retail Price Index (RPI)-linked revenue stream; and an investment grade-rated entity regulated by Ofwat.

The statement from INPP also claims that the project offers “strong protections to mitigate construction risks”, including: the existence of an experienced management team, project manager and construction contractors; significant incentives under the construction contracts and licence and stakeholder arrangements; and a government support package including construction risk mitigation.

TTT is part of a sewer network which will carry sewage and storm water discharges from the broader London sewerage system. The tunnel will be about 25 kilometres long, 7.2 metres in diameter and will run up to 65 meters below the River Thames. Starting in West London, it will follow the route of the Thames to the existing Lee Tunnel, with sewage transferred to the Beckton Sewage Treatment Works in East London.

Construction of the project will be under three main contracts divided by geography. The preferred bidders for construction were announced in February, with the West contract going to BAM Nuttall, Morgan Sindall and Balfour Beatty; the Central contract to Ferrovial Agroman UK and Laing O’Rourke Construction; and the East contract to Costain Vinci Construction Grand Projects and Bachy Soletranche. Construction is scheduled to start next year and complete by 2023.

During the construction period, the TTT will have a bespoke regulatory framework that will allow it to start generating revenue when construction begins. Once fully operational, the project will be regulated by Ofwat in line with other water and sewerage companies’ regulatory cycles.

The competition for TTT initially involved 12 parties invited to tender, which was whittled down to just two bids for the final “revise and confirm” round.

“We are convinced that this project will modernize a pivotal aspect of London’s essential infrastructure and we are delighted that Allianz can help to upgrade London’s sewage system for 22nd Century London,” said Christian Fingerle, chief investment officer responsible for infrastructure investments at Allianz Capital Partners.