Infrastructure Investment World 2013

Building for 22nd century London
Mike Gerrard
Managing Director, Thames Tideway Tunnel

A major UK infrastructure project with an
estimated cost of £4.1bn
Vital to London’s future and a priority for the
Government and Ofwat
Financed by private sector investors and
benefiting from an enhanced regulatory
framework and Government support

Competition to launch 2014

2

Population increase in
London in the last century...

... has created 2 problems:
Overloaded sewage
treatment works;
discharging directly
into the river after
rainfall
Overloaded sewer
network; discharging into
the river via Combined
Sewer Overflows (CSOs)

3

4

5

6

7

8

Acton Storm Tanks

9

West



Bam Nuttal, Balfour Beatty, Morgan Sindal JV
Costain, Vinci, Bachy JV
Dragados, Samsung JV
Ferrovial Agroman,  Laing  O’Rourke  JV

Central



Bam Nuttal, Balfour Beatty, Morgan Sindal JV
Costain, Vinci, Bachy JV
Ferrovial Agroman,  Laing  O’Rourke  JV
Skanska, Bilfinger, Razel Bec JV

East




Bam Nuttal, Balfour Beatty, Morgan Sindal JV
Costain, Vinci, Bachy JV
Bechtel, Strabag JV
Bouyges Travaux Publics
Hochtief, Murphy JV
10

A new dedicated perpetual utility company
(Infrastructure Provider – IP)
Flood and Water Management Act 2010

Regulated by Ofwat
Supported by Government
Established by competition
11

Sponsored
by Thames Water
A
Project
manager

CH2M
Hill
A
Planning
application
submitted
A
Close
cooperation with Lee Tunnel and Crossrail
A
Development
of IP resources
a
13

Land assembly
A
Tender manager – construction and IP
A
Interface works
A
Billing customers
A
Precluded from bidding for the IP
a
14

A unique opportunity to invest in a new UK regulated utility
company
~£1bn equity opportunity

Familiar regulatory framework but enhanced in certain key areas
cost of capital bid by investors and fixed up until project
acceptance

investment remunerated during construction – dividend yield
during construction
Government support will further protect investors
sharing of certain risks mitigation of exceptional events,
including where this offers customer better value for money
total investor funding requirement capped
Investors do not need project delivery expertise – the IP will
already have this
15

• Planning
application
submitted
• Start
construction
procurement

• IP market
engagement

• Start IP
procurement

• Planning
decision
• Binding bids
due before end
2014

• IP financial close
and licence
award
• Construction
contracts award
• Start early
works/
mobilisation

16

Invest at the creation of a new, regulated utility
company

Familiar UK water industry regulatory framework
Dividend yield during construction
A high quality, rare and historic investment
opportunity

17

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