This slicing and dicing of the money may look complicated, but Thames Water and Tideway say it is the cheapest way to do it. The likes of Allianz and its partners, they claim, can get the money together cheaper than anybody else.
Terms for the financiers bidding to fund the project appear to have been stringent.
One from a rival consortium which failed to win it tells the Standard: “The returns are incredibly low. The costs to bid for these projects are huge and that puts off a lot of bidders. The reason Allianz and co won was their source of funding was cheaper than ours.”
Tideway’s backers point out that money made from the sewer will benefit about 1.7 million UK savers, who will have an indirect investment interest in the tunnel through their pensions with Allianz and its partners.
Environment Minister Rory Stewart also points out that the lack of sewerage capacity is constraining the number of new homes that can be built in London. A super sewer, his department says, will allow for 40,000 new homes to be catered for.
That, and other economic benefits such as the 9000 direct and indirect construction jobs created, would mean the UK economy stands to gain a net £13 billion from the sewer after construction and financing costs.
Against: As investment bankers drum up support for the super sewer bonds (and fees for themselves), critics are concerned at the Byzantine financing structure, and the use of City, rather than public sector funding.
“Using the private sector is a very expensive way of doing it,” says Sir Ian Byatt, head of water regulator Ofwat between 1989 and 2000. “If the Government were to finance it, it would be much cheaper. It is the Government who want it —they should pay for it.”
Thames has also come in for criticism over the way it is not putting its own money into the project, relying instead on third parties and bill payers.
This is despite the fact Thames has a legal obligation as a regulated utility to take responsibility for the quality of London’s sewage system and make sure water is treated properly.
Once the tunnel is finished, Thames will pay Tideway a monthly fee to use it. This will come directly from customers instead of Thames Water.
Infrastructure expert and long-term critic of the project Martin Blaiklock says the situation is worsened by the fact that Thames has not paid any UK corporation tax for the past five years but has been paying dividends to its Australian owner Macquarie.
Blaiklock says: “It’s Thames’ project through and through. They designed it and appointed the management — it should have been done by Thames Water.”
Customers
For: Tideway said it has been spending a huge amount of time and effort engaging with the communities around the areas that will be affected by the construction project.
It has been holding monthly meetings to keep residents up to date and is paying for double glazing to block out noise during works. Tideway’s hearts and minds campaign is important, given Thames’ increase in bills to pay for the new sewer, but the water supplier said the hike is not as bad as first feared.
The total increase works out at up to £25 a year, down from an original number of £80. About £13 of this has already been added to bills and the other £12 will not be included until 2020.
Regulator Ofwat has vowed to protect customers to ensure they get a fair deal. “It is important they have trust and confidence that everything possible is being done to keep costs down,” it said.
Against: That £25 surcharge on customer bills may be less than £80, but critics say Thames should bear it, not bill payers.
Lord Berkeley, the Channel Tunnel’s public affairs manager from 1981 to 1994, has also attacked leaders of the scheme for foisting costs onto Thames Water bill payers outside London who stand to gain no benefit. “People are funding something that’s totally unnecessary,” he said. “The benefits people in Oxfordshire get, for example, are nil.”
The upheaval caused by the project has also sparked protests from community groups along the river. Ann Rosenberg, who led a campaign against the sewer in Fulham, said a 300-strong petition against the project was shunned by Thames.
“The evidence we put across on mental and physical health was just ignored,” she claims. “One block of flats is three metres from the site. The health and safety implications are enormous.”
Another campaigner, Barney Holbeche from Southwark, says: “It’s a 19th-century solution to a 21st-century problem. If they are as good as Bazalgette, I will be very surprised.”
Environment
For: Bazalgette’s sewers currently flood more than 50 times a year, bringing a slew of sewage into the Thames when it rains heavily. These initial flushes have a heavy load of solids from the sewage system.
Tideway claims the super sewer will wipe out these foul first flushes every time and cut overflows to fewer than four a year.
It’s not just users of the river who’ll benefit from the cleanup, the sewer’s fans say. The Treasury will benefit, too; a European Court of Justice ruling in 2012 decreed that, unless Britain got to grips with the Thames pollution issue, we would have to pay fines of up to £620,000 a day.
The Government has received a waiver on the payment because Thames Water is addressing the problem, but the current running total of the theoretical fine is £912 million.
“For a modern city, London’s dirty secret of polluting its river with millions of tonnes of untreated sewage is shocking and should concern us all,” Tideway chief executive Andy Mitchell says.
Against: Opposition groups question whether a giant new sewer is needed at all. In January this year, a smaller sewer called the Lee Tunnel was opened to cut the number spills from the Abbey Mills Pumping Station, a particularly polluting overspill point in east London. Work was also carried out to upgrade the Beckton sewage plants, one of Europe’s largest, to treat larger volumes of sewage.
Chris Binnie, who was appointed by the Government in 2005 to solve the Thames’ pollution problem and first recommended a super sewer before a Damascene conversion, said such upgrades had already halved the volume of sewer spills. He added that the evidence doesn’t justify the scale of the super sewer project.
“When it doesn’t rain, it will sit empty,” he says. Concerns over health risks to Londoners posed by sewage spills have also been overstated, he said. Health tests on recreational rowers in areas like Putney and Chiswick showed a sickness rate of 13 in every 1000, against a UK average of 190.
Binnie wants the Government to fight the EU fines by using data to show the Thames water quality is “acceptable” since the upgrades.
