The European Investment Bank has agreed to provide a GBP 700 million loan for the GBP 4.2 billion Thames Tideway Tunnel, the biggest infrastructure project ever undertaken by the UK water industry. Often dubbed the ‘super sewer’, the project is urgently needed to help tackle overflows of untreated sewage into the river through the centre of the British capital.
The European Investment Bank is the world’s largest lender for water-related investment and the backing for the Thames Tideway Tunnel represents the largest-ever loan for water investment worldwide. The 35-year long-term loan from Europe’s long-term lending institution has been agreed with Tideway, the new regulated company set up to design, build, commission and maintain the 25 km tunnel, which will directly control or intercept discharges from more than 30 combined sewer overflow points, stretching from Acton in the west to Stratford in the east.
“The new GBP 700 million loan for Tideway represents the European Investment Bank’s largest-ever water loan and the most significant support for UK infrastructure since Crossrail. This demonstrates the EIB’s strong commitment as the largest source of financing for long-term investment in UK water infrastructure since before privatisation and builds on more than GBP 2 billion of support for investment to improve London’s water and waste water infrastructure since 1989. We are pleased to support the construction of the Thames Tideway Tunnel, a world-class engineering scheme, delivering infrastructure vital to clean up the Thames,” said Jonathan Taylor, European Investment Bank Vice President.
“The EIB’s backing for Tideway is an important vote of confidence in us as a company, as we move into the construction phase. This loan covers a significant proportion of the financing we need to raise. The innovative, index-linked structure enables us to lock-in financing costs, whilst also matching our funding requirements and profiling debt service, in line with the expected growth in our asset base,” said Mark Corben, Tideway Chief Financial Officer.
“The Thames Tideway Tunnel is a really impressive project. It will improve the quality of the water in the Thames - benefitting fish and wildlife - and all the people along its banks. It will prevent millions of tonnes of sewage flowing into the water. It is also an excellent example of investment in the UK’s water sector, supported by financing from institutions such as the European Investment Bank: good value for customers, creating jobs and making the long term infrastructure decisions necessary to protect this great city and our natural environment in the century ahead,” said Rory Stewart MP, Environment Minister.
The European Investment Bank is the world’s largest international public bank and is 16% owned by the UK government. The European Investment Bank has provided more than GBP 12.6 billion for investment in water and waste water infrastructure across the UK including expanding reservoirs, reducing leaks and protecting against flooding.
Lending by the EIB in the UK last year totalled GBP 5.6 billion and supported long-term investment in 40 projects across the country. This represented the largest annual engagement since the start of EIB lending in the UK in 1973, which has supported nearly GBP 16 billion of overall investment.
In the last 10 years the European Investment Bank has provided nearly GBP 8 billion for direct investment in London, with additional investment from UK wide programmes.
The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals.
London’s modern-day sewerage network was founded by Sir Joseph Bazalgette, following the infamous ‘Great Stink’ of 1858. The interceptor sewers he built to keep sewage out of the Thames still form the backbone of the network today, but are coming under increasing strain, as the capital’s population continues to grow. Since Victorian times the number of people living in the city has quadrupled from two to eight million, a figure set to rise to ten million by 2030, excluding the huge volumes of people who travel into the city each day for work or pleasure.
In conjunction with the Lee Tunnel and Thames Water’s upgrades to the five sewage treatment works on the tidal Thames, the Thames Tideway Tunnel will address the 39 million tonnes of sewage historically discharged into the river in a typical year, via the capital’s overloaded Victorian sewerage network. In 2014 this figure was 62 million tonnes.
The Thames Tideway Tunnel will be 25km long, with the main tunnel’s internal diameter measuring 7.2 metres. It will have a storage volume of 1.24 million cubic metres and run up to 66 metres beneath London. Joining up with the Lee Tunnel, it will control, temporarily store and transfer, the excess sewage to Beckton for treatment. In addition to the main tunnel, there will be several connection tunnels.
Tideway is the trading name of Bazalgette Tunnel Limited. The company is regulated by Ofwat, which awarded its licence in August 2015. Out of the project’s total GBP 4.2 billion estimated cost, Ofwat has set a regulatory baseline of GBP 3.1 billion for Tideway, with the rest being funded by Thames Water, the capital’s main provider of water and waste water services. Tideway’s shareholders are Allianz, Amber Infrastructure, Dalmore Capital and DIF. Collectively they represent the interests of 1.7 million British pension fund holders.