Thames super-sewer will cost Londoners less than thought as financing costs fall

Balfour Beatty will begin work on the Thames Tideway in September

Thames Water

24 August 2015

The controversial “super-sewer” under the Thames will be built at a much lower cost to London households than predicted, Thames Water has said.

Slashing the financing costs will mean Londoners’ annual water bills should remain flat, at around £370 before inflation, for the next five years.

News of the falling cost of the 25 kilometre-long super-sewer came as the water regulator formally awarded a licence to Bazalgette, the special purpose company set up to lead the project.

Construction work will start on the tunnel next month.

The cost to Londoners of the tunnel was put at a worst-case £70 to £80 on top of their annual average bills, but now financiers say it can be built for just £20 to £25, before inflation.

The super-sewer is being built to deal with the problem of 39 million tonnes of untreated sewage that flow into the tidal part of the Thames every year, as well as cope with the growing population of the capital.

Thames Water said that “cheaper finance and efficiencies” had brought down the projected cost of the new infrastructure dramatically.

Ofwat, the water regulator, said the lower costs were achieved by putting the financing costs through a competitive process, the first time that has been done in the water sector.

As a result of this, Bazalgette, which is building and financing the tunnel, has achieved a cost of capital of just 2.497%.

Separately, Balfour Beatty, the construction company that has been hit by seven profit warnings since 2012, said it would begin work on a 6km section of the tunnel in September.

Balfour Beatty has been awarded a £416 million contract on the project as part of a three-way venture with Morgan Sindall and BAM Nuttall.

Balfour Beatty will build the Super-sewer

Luke MacGregor/Reuters

The Thames Tideway Tunnel is expected to create more than 9000 direct and indirect jobs at the peak of construction.

The tunnel, 7.2 metres in diameter, will run under the River Thames from Acton in west London to Abbey Mills in the east.

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Thames super-sewer will cost Londoners less than thought as financing costs fall

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