An international consortium of contractors and financiers has won one of the U.K.'s last privately financed infrastructure projects, covering the $1.3-billion Silvertown highway tunnel under the River Thames in East London. Construction of the controversial 10.9-m-dia bored tunnels is due to start this year and end in 2025.
On May 30, Transport for London named the Riverlinx consortium as preferred bidder for the design, build, finance and maintain contract. The deal covers a twin-bore tunnel roughly 1.4 km long linking the Greenwich Peninsula on the south bank and the Royal Dock, just east of the Canary Wharf. The consortium will maintain the tunnels for 25 years once completion ends.
Riverlinx includes Cintra, the toll road unit of Spanish contractor Ferrovial Agroman, and South Korea's SK Engineering & Construction. Netherlands-based BAM PPP PGGM and its U.K and German construction divisions will also work on the tunnels. Financiers Aberdeen Standard Investments and Macquarie Capital are also included in Riverlinx.
To procure the tunnel TfL has adopted the Private Finance Initiative (PFI) model, which has fallen out of favor with central government after being used for some 30 years on more than 700 projects.
PFI has financed more than 60 government transportation projects, valued at around $10 billion, calling for annual payments to contractors totaling $1.5 million.
The finance ministry last year abandoned the PFI procurement model and is looking for other ways to attract the estimated $380 billion of private infrastructure investment its says will be needed in the next decade.
The Silvertown project will be financed with no call on government funds, and therefore is unaffected by the policy change. (Story continues below)
|The planned twin-bore tunnel will be roughly 1.4 km long, linking the Greenwich Peninsula on the south bank and the Royal Dock, just east of the Canary Wharf. Image: courtesy of Riverlinx|
Riverlinx is putting together financing with some equity and a mixture of bank and institutional lending with no support or guarantees from the government. TfL will begin to pay performance-based monthly fees once the crossing opens to traffic.
TfL will finance the project investment with tolls on the Silvertown crossing and the existing nearby, congested Blackwall tunnel. TfL will release specifics of its tolling strategy nearer the completion of construction.
When opened, the tunnel will fall within London’s expanded Ultra Low Emission Zone, which will impose a charge on the most polluting vehicles. Since April 8, cars entering the zone, which now covers central London only, are charged $15.8 above the existing congestion charge, and truck drivers must pay $126.
However, the chair of Greater London Assembly's Environment Committee, Caroline Russell condemns TfL's contract award. "We need more ways for people and goods to cross the river without using cars and vans," she says. The tunnel "has no place in a city that recognizes we are in a climate emergency."