Serco signs £415m UK prison contract

Serco has been awarded a £415m contract by the Ministry of Justice to build and operate a new prison at Belmarsh West in London. While debt financing for the project will be provided by a club of four banks, the equity finance will be solely provided by Barclays Infrastructure Funds.

UK outsourcing company Serco Group has signed a contract with the Ministry of Justice to provide and operate a new prison at Belmarsh West, London. The contract will run for 26 years and six months and has been valued at £415 million (€502 million; $630 million).

The local prison at Belmarsh West will be operated under a design, construct, manage and finance (DCMF) contract. It will be built to Category B standards – for prisoners who do not require maximum security – by Serco’s construction partner Skanska, a Swedish construction company, and will accommodate 900 adult male prisoners.

While the debt financing is being provided by Bank of Ireland, Barclays Corporate, Helaba and The Royal Bank of Scotland, Barclays Infrastructure Funds is the sole provider of the equity finance. The construction of the prison is to start immediately and will be ready by 2012.

This is the first prison contract to be awarded in the UK to an alliance of the private and voluntary sectors. Serco previously announced its selection, in June 2009, as the preferred bidder to provide and operate two new prisons at Belmarsh West, London and Maghull, Liverpool. It is intended that the contract to provide and operate the prison at Maghull will be signed later this year.

Serco is a FTSE 100 international service company that manages four adult prisons in the UK and the capacity of two of these has recently been increased. It also manages a young offenders institution and a secure training centre for young people, as well as providing electronic monitoring and court escort and custody services.