UK pension insurer in £100m Thames Tunnel deal

Pension Insurance Corporation (PIC), a London-based insurer of defined benefit pension funds, has invested £100 million ($147 million; €130 million) in secured debt tied to the UK’s Thames Tideway Tunnel.

The debt was issued by Tideway, the new company created to build the facility, after the latter priced a bond issue of the same amount in early June. Shareholders in Tideway include Germany’s Allianz; UK-listed International Public Partnerships (INPP), through its adviser Amber Infrastructure Group; London-based Dalmore Capital; and Dutch-headquartered DIF.

The consortium was granted a licence to own and operate the project in August 2015, as well as provide £3.1 billion out of the total £4.2 billion needed to finance it. The remainder is to come from local utility Thames Water.

The debt is split over four tranches with a four- to five-year deferral period, helping to provide “certainty of funding cost for the borrower, but reducing cost of carry, with an unusual feature of no funding drawn on day one to help match the cashflow needs of the construction works,” PIC said in a statement.

Linked to the Retail Price Index, half of the issue will mature in 2048 while the remainder will terminate in 2054.

The news comes after the European Investment Bank agreed to lend £700 million to the 25km tunnel, which it billed as the largest infrastructure project ever undertaken by the UK water industry. The loan was also described as the EIB’s “largest-ever water loan and the most significant support for UK infrastructure since Crossrail”.

Six banks have also provided senior debt to the project, including Royal Bank of Canada, Lloyds Bank, Credit Agricole, SMBC, BTMU and Santander.