Skanska has been given £300m of additional work on the Battersea Power Station development, taking its total contract value on the high-profile scheme to £1.15bn.
The phase-two contractor was awarded a £750m deal in September 2014 for the highly complex renovation of the iconic power station and the provision of residential, retail and office space.
The original contract scope included 254 flats, a hotel, retail space and 470,000 sq ft of office space.
Skanska has now been awarded another £300m of work that includes the construction of an energy centre, underground roads, a basement and a new public space called Malaysia Square.
It is also continuing the £100m ongoing preliminary works contract on the site.
Battersea Power Station Development Company chief executive Rob Tincknell told Construction News the scope of works awarded to Skanska had changed “enormously”.
BPSDC had been waiting for the outcome of a design competition for the square before it could be added into the package of works, the company’s chief operating officer Philip Gullett said.
The developer has also moved some of the plant and electric switch room areas that were located inside the power station outside of the building to increase the lettable floor space.
Battersea Power Station phase 2 Feb 2016 4
The increase in Skanska’s works package to £1.15bn makes it the largest to date for a commercial mixed-use scheme in the UK.
The provisional contract value for phase three, awarded to Bouygues, is £1bn.
The increase in the total value of Skanska’s contracts includes around £30m-£50m of cost inflation. This is in line with the developer’s expectations, Mr Tincknell said.
Construction cost inflation is affecting projects across the capital. Figures from Arcadis show average annual inflation in London peaked at 9 per cent in Q4 2014 and rose by at least 7-8 per cent during 2015.
Arcadis has estimated the rate of inflation will fall to between 4 and 5 per cent in London during 2016.
Mr Tincknell said the developer had been able to increase the scope of work to be carried out by Skanska at this stage in the development process because Battersea had sold more flats than expected. This has enabled BPSDC to draw down funds for the works earlier than originally planned from its £2.3bn debt facility for phases one, two and three.
“Phase two was successful so it was able to absorb some of the infrastructure costs that were originally put outside that phase,” Mr Tincknell said.
Battersea Power Station phase 2 Feb 2016 6
Mr Gullett said the developer wanted to make the scope of works “the most efficient”.
“It made sense for Skanska to take on the additional £300m of work at this stage. [The extra works] are so adjacent to the power station, it’s the only way to execute the work,” he said.
“You can’t have another contractor building the bridge at Malaysia Square; it has to be Skanska. [The same applies] for the energy centre.”
Phase-one contractor Carillion has also had additional work added to its package, including the redevelopment of a row of railway arches, which will be turned into commercial and community space.
Mr Tincknell said BPSDC had yet to “completely finish” signing all the contracts with Skanska for the power station. However, Skanska is already on site redeveloping the power station and carrying out preparatory works for the energy centre.
One of the contracts yet to be signed between Skanska and BPSDC includes the fit-out, which has been deferred to a later date, Mr Tincknell said.
So far the client has sold 1,500 flats across the seven phases of the development.
The developer currently has detailed planning for phase three, with no outstanding conditions.
Mr Gullett said he did not envisage further changes to the scope of works within phase two, but added that BPSDC was looking at the overall phasing of the project to allow for greater flexibility as the project moves forward.
The Battersea Power Station site is owned by a consortium of Malaysian investors comprising S P Setia, Sime Darby and the Employees’ Provident Fund.
Practical completion of the first two cores of phase one is expected by the end of the year, at which point residents will start moving in.
Phase two completion is scheduled for 2020, to coincide with the opening of the Northern line extension, which Mr Gullett described as a “game-changer” for the development.
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