The three design and build consortia that have secured contracts to build the west, central and east sections of the 25km Thames Tideway Tunnel will deliver cost savings of around £450m compared to the upper range of costs forecast at tender stage.
Balfour Beatty, in joint venture with Morgan Sindall and BAM Nuttall, has been awarded the £416m western section contract, originally estimated at £300m-£500m.
Meanwhile, the £746m central contract was awarded to a joint venture between Ferrovial Agroman UK and Laing O’Rourke Construction. Originally, the client tendered the contract with an estimated value of £600m to £950m.
The £605m eastern contract went to a joint venture of Costain, Vinci Construction Grands Projets and Bachy Soletanche, while the contract was originally put at £500m-£800m.
The contractors will be working for Bazalgette Tunnel, a new special-purpose company licensed yesterday by Ofwat to take the project forward on behalf of Thames Water.
Bazalgette will now take over Thames Tideway Tunnel, the arms-length delivery organisation chaired by Sir Neville Simms that managed the planning permission and procurement phases of the project. Its chief executive Andy Mitchell joined the tunnel project from Crossrail last year.
Bazalgette is backed by pension funds and other long-term investors represented by Allianz, Amber Infrastructure Group, Dalmore Capital Limited and DIF.
The investor group includes a significant proportion of UK pension funds through which more than 1.7 million UK pensioners will have an indirect investment in the project.
According to Ofwat, Bazalgette’s success in lowering finance costs for the project, along with construction efficiencies, have reduced the overall costs of the project by “hundreds of millions of pounds” – and had a direct impact on Londoners’ water bills.
It is now estimated that water bills per household per year will include just £20-£25 apportioned to the project, compared to estimates of £70-£80 per year set four years ago.
The Thames Tideway Tunnel will stem the flows from the 34 “combined sewer overflows” (CSOs) identified by the Environment Agency as the most polluting.
The £4.2bn project will connect up with the Lee Tunnel, which has already been constructed by Thames Water to take wastewater otherwise destined for the river to Beckton sewage works, east London, from early in 2016. The project is expected to take seven years to complete.
