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Thames Tideway MD warns of election delay to financial close

The financial close of the £4.2bn Thames Tideway Tunnel could be delayed until after the 2015 general election, its managing director has admitted.

Michael Gerrard told Construction News the pre-election period known as purdah, when the government refrains from major policy decisions or announcements, could delay financial close with an infrastructure provider.

Mr Gerrard said a tender for the infrastructure provider, which will finance and deliver the project under a licence from water regulator Ofwat, is due to be issued next month and will take up to nine months to procure.

He said: “The anxiety that bidders will have is that, unless we are careful, we will be trying to reach financial close in [the] purdah period where decisions are slow, so [if that] happens… we will delay financial closure.

“We’re going to do everything we can to avoid it but there is a risk [it will fall within] purdah and if that happens we will do it after the election - that is a factor I can’t control.”

However, Mr Gerrard stressed the project was currently running on time and its construction would not be affected.

A source close to the scheme told Construction News that delays in choosing an infrastructure provider would cause uncertainty for contractors, with “question marks” over who their employer would be and where the funding was coming from to pay the firms’ bills.

“There is a lot of uncertainty around [the project finance] and I think the whole issue around purdah and the election coming is just going to be another complicated factor,” he said.

But Mr Gerrard said the legal framework used by Ofwat would ensure the infrastructure provider would be “financially robust”.

Thames Tideway Tunnel has submitted a planning application for a development consent order to the planning inspectorate, which is due to make a recommendation in mid-June.

A final decision is due to be confirmed by government ministers on 12 September 2014.

The government has pledged financial assistance to cover “exceptional and remote” financial risks for the infrastructure provider, being procured by Thames Water, but is yet to confirm the exact level of support.

Two separate procurement processes are being run for the scheme, dubbed London’s ‘super sewer’: one for construction and one for the infrastructure provider.

Procurement for the construction contracts has been staggered into a central, east and west section to reduce the pressure on contractors bidding for all three sections of the projects, which are valued between £1.4bn and £2.3bn.

Construction News revealed that 18 contractors had been shortlisted in October 2013 for the three contracts.

Tenders have since been issued for the west and east sections. A final tender will go out this month for the central contract.

The construction contracts are expected to be awarded next year and enabling and engineering works will begin soon afterwards, with main construction works due to begin in 2016.

The next general election, fixed by statute for the first time, is on 7 May 2015.

Deloitte head of government and infrastructure Nick Prior said purdah would be a particular issue in the run-up to this general election because of the fixed date and a potentially longer campaigning period.

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