How the super sewer is financed

Tideway has been delivered differently. Its innovative funding model encourages long-term, low-cost private sector investment in critical infrastructure. With government protections in place, Tideway has been able to secure competitive financing, keeping costs to customers down – while more than two million pensioners have an indirect stake in the project. It is now being touted for future infrastructure projects.

Key features of the model

Shareholders provided £1.3bn before work started, earning a return though the construction period

The government provided protection as ‘insurer of last resort’ – reducing cost of capital. This remains undrawn.

Cost is spread over millions of water bills, with regulation providing consumer protection

Tideway was the first project delivered under the Specified Infrastructure Project Regulations, and has various unique features that has contributed to its success. Tideway’s shareholders initially provided a £1.3bn equity base in order to get the project underway. Later, additional capital was secured via the markets to allow the super sewer’s construction. These debts are repaid over the long term by Thames Water bill payers – much like a mortgage. Before work started, it was estimated that the project would cost customers between £20-£25 per year (in 14/15 prices). The cost to bill-payers remains well within that range.

Shareholders

Tideway’s shareholders provided a £1.3bn equity base
This was comprised of a £750m loan, and £550m equity
The loan is subject to an 8% coupon rate, designed to provide a return on the full £1.3bn – resulting in an effective rate of 4.6%
At System Acceptance in 2027, the intention is to convert the shareholder loan into equity

Additional Financing

Tideway has raised £3.3bn in long-term debt:

Tideway raised £3.3 billion in long-term debt to build the Thames Tideway Tunnel, with a significant portion of it as inflation-linked debt. This type of debt adjusts payments based on inflation, matching Tideway’s revenue from water bills, which also follow inflation (per Ofwat rules). It also attracts long term investors like pension funds, who need exposure to inflation to match their liabilities. Tideway was a pioneer of green financing in the UK having raised more than £2 billion in green bonds and loans since 2017.

Green bonds - £1.83bn
European Investment Bank - £700m
Green loans - £325m
Other loans - £400m

Sustainability Report 2023/24

Annual Report 2023/24

Other notes:

Our credit ratings were affirmed at Baa1 by Moody’s in June 2024 and BBB+ by Fitch in May 2024, both with a stable outlook.
Tideway’s Green Bonds have been given ‘Dark Green’ status by S&P Global Ratings – the highest possible
We have a sustainability-linked RCF which aligns our financing with our ESG objectives