The Thames Tideway Tunnel, nicknamed London's new "super-sewer", received planning consent on 12 September 2014.
The project, which forms part of the Mayor of London's Infrastructure Plan for London, will take seven years to build at a cost of £4.2billion.
Why does London need a 'super-sewer'?
London's sewers were built in the 1860s by Sir Joseph Bazalgette to prevent raw sewage being flushed straight into the Thames (which at the time was thought to be responsible for a series of cholera outbreaks) at a cost of £4.2million. Whilst this cost was undoubtedly huge at the time, Thames Water estimates that re-building Bazalgette's system today using modern methods would cost in the region of £50-60billion.
The 1,000 mile network of underground sewers was revolutionary but whilst Bazalgette's sewers remain the backbone of London's sewer network, and in surprisingly good condition, they are now struggling to cope with the demands of a modern capital city.
The main problem is that the sewers were built to remove not only waste from people's homes but to also act as London's drainage system. However, since the 1860's London's population has quadrupled and large-scale development has meant that huge areas of ground where rainwater could once drain through have now been built or paved over.
As a result, London's sewer system is overflowing and last year 55million tonnes of untreated sewage was washed into the Thames. Not only does this impact negatively on the environment but it also contravenes the European Urban Wastewater Treatment Directive
What is the 'super-sewer'?
The new 25km tunnel, which will run up to 65 metres below ground, will start at Acton, in West London, and will track along the path of the Thames to Abbey Mills Pumping Station in East London. From there, the sewer will connect to the Lee Tunnel which will transfer the sewage to Beckton Sewage Treatment Works.
The three main tunnel drive sites are planned to be in Fulham, Battersea and Southwark, with work being carried out at 21 other sites along the planned route.
How will it be funded?
The sewer will be delivered by Thames Tideway Tunnel Limited (the Infrastructure Provider) which will build, own, finance and maintain the project subject to regulation by Ofwat. The successful bidder to run the Infrastructure Provider is due to be announced in early 2015.
The project is to be funded by Thames Water (around £1.4bn) with the majority of the construction cost (£2.8bn) coming from the Infrastructure Provider. Significant interest in investing in the Infrastructure Provider has been shown by overseas sovereign wealth and pension funds. The UK government has also indicated that it is willing, in effect, to act as a lender of last resort via a support package during the construction phase to assist with reducing finance costs for the Infrastructure Provider.
To attract foreign investment, revenue will be earned during the construction of the tunnel, which will be paid for by a levy on Thames Water sewerage customer bills (over a 10 year period).
Comment
The Thames Tideway Tunnel project is hugely controversial; both Southwark and Kensington and Chelsea Councils have already threatened to take legal action and the levy on water bills may prove to be as unpopular as the green levy added to energy bills (which has since been scaled back by the Government following public concerns about increasing energy costs). Whilst all sewage and water infrastructure improvements are paid for by customers within a particular region a project of this scale and cost has not previously been carried out and the increase in water bills for Thames Water customers will clearly be significant.
If the project goes ahead it will be one of the largest construction projects of its type in Europe. Construction on the project is due to start in 2016 with completion expected sometime in 2023. The bidding process for investors in the Infrastructure Provider should be a useful barometer of the appetite for overseas investors to become involved in delivering major infrastructure projects in the UK.
For further information on the Mayor of London's Infrastructure Plan for London see Matthew Taylor's previous alert here.
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