A5 20mm
A4 23mm
A3 26mm reconnecting london TIDEWAY ANNUAL REPORT 2015/16 with the river thames
A2 39mm
ANNUAL REPORT 2015/16
3 TIDEWAY ANNUAL REPORT The Thames Tideway Tunnel will be a major new Contents sewer, which is urgently needed to protect Strategic Report the tidal River Thames Health, safety and the 05 Chairman’s Introduction from pollution wellbeing of our people and 06 Chief Executive Officer’s Statement the public are paramount – 07 Key Developments in 2015/16 we intend to work safely 09 Who We Are and What We Do or not at all 16 Our Business Model It is being delivered by 18 Our Vision and Strategy Tideway, a newly created 22 Risk Management regulated company 26 Performance Review 32 Financial Performance Review We are working closely with our local stakeholders in Governance delivering the tunnel 37 Corporate Governance Report The tunnel is being financed 58 Audit Committee Report by the private sector, giving 64 Remuneration Report more than 1.7 million UK 72 Directors' Report pensioners an indirect We aim to deliver the project 75 Long Term Viability Statement investment in Tideway to the right quality, ahead of Financial Statements time and below budget, for the 78 Independent Auditor’s Report benefit of the environment, local 80 Financial Statements The tunnel is the largest stakeholders, Thames Water’s 84 Notes to the Financial Statements project in the water sector bill payers, and investors since the construction of Sir Regulatory Reporting Joseph Bazalgette’s interceptor 98 Introduction sewers in the 1860s RECONNECTING LONDON, 98 Regulatory Annual Performance Report 110 Transfer Pricing Information AND LONDONERS, 111 Risk and Compliance Statement WITH THE RIVER THAMES 112 Condition K Reporting 113 Other Reporting Requirements 115 Data Assurance Summary 115 Auditor's Report 119 Glossar y
Bazalgette Tunnel Limited (BTL) is the licensed Infrastructure Provider set up to design, build, commission and maintain the Thames Tideway Tunnel. BTL trades and is known to the public as 'Tideway'.
ANNUAL REPORT TIDEWAY 1 Strategic Report
05 Chairman’s Introduction 06 Chief Executive Officer’s Statement 07 Key Developments in 2015/16 09 Who We Are and What We Do 16 Our Business Model 18 Our Vision and Strategy 22 Risk Management 26 Performance Review 32 Financial Performance Review
‘The River Thames is central to London’s Jonothan Starkey, a Pimlico resident, has been helping Thames21 remove litter from the river since 2009. One of the charity’s most dedicated supporters, he can prosperity’ regularly be spotted venturing into the river in waders.
2 TIDEWAY ANNUAL REPORT ANNUAL REPORT TIDEWAY 3 Strategic Report Chairman’s Introduction
n Great Britain we are indebted to the became an independent, regulated water vision of our Victorian forebears, who laid company − Bazalgette Tunnel Limited. Ithe foundations of much of the public Bazalgette Tunnel Limited, trading as infrastructure we use today. This has served Tideway, is owned by a shareholder group us extremely well, in many cases for decades comprised of funds managed by Allianz, longer than was originally intended, but now it Dalmore, Amber Infrastructure Group and must be upgraded both for our own use and DIF. Between them, more than 1.7m UK to prepare it for future generations. pensioners have an indirect investment in In that context one of the most urgent Tideway. The investor group is represented priorities, both for London and nationally, by four shareholder directors who sit on as recognised in the Government’s ‘Top our Board, alongside five independent 40 infrastructure investments’, is to help directors, including me, together with the SIR NEVILLE SIMMS address the regular pollution of the tidal three executive directors. NON-EXECUTIVE CHAIRMAN River Thames with untreated sewage. To You will read more about the Board and have an open sewer flowing through our its Committees elsewhere in this report, but I capital city is simply unacceptable. am sure you will be pleased that in the short ‘The scheme A key part of the solution to this particular time this Board has been together it has problem is the Thames Tideway Tunnel. endorsed new plans to significantly improve benefits from a I am pleased to be part of the organisation the timetable for the delivery of the project. delivery model brought together to ensure that this solution To achieve these plans, the Board is becomes a reality for the benefit of London delighted to have secured the services designed to and all users of the River Thames, for many and commitment of a first class team of years into the future. executives, to lead both the financing encourage private- Significant investment into major and construction activities and to rise infrastructure projects is often best achieved to the challenge of doing this safely and sector investors by attracting private sector finance. The efficiently, in alliance with our contractors to finance major Thames Tideway Tunnel is the first scheme and other partners. ● to benefit from a new delivery model, infrastructure’ specifically designed to encourage pension funds and other long-term private sector investors to become involved in the financing of regulated water assets like ours. It was therefore a great achievement by all those who had worked on the scheme for many years that in August 2015, when Sir Neville Simms, our licence was awarded by Ofwat, we Chairman
4 TIDEWAY ANNUAL REPORT ANNUAL REPORT TIDEWAY 5 Chief Executive Officer’s Report
t is a great privilege to be the CEO of Water and us, we have established a plan Tideway, charged with the establishment to de-risk the programme, with the aim Iof a company to deliver the much needed of completing handover to Thames Water expansion of Sir Joseph Bazalgette’s (tests completed and handover criteria London interceptor sewers. In doing met) earlier than the baseline date in bn so, we will clean the Thames to a level 2024. The benefits of striving for this are £1.3 unlikely to have existed for more than a clear - for our neighbours (as we know THE EQUITY SUM COMMITTED BY THE COMPANY SHAREHOLDERS century. Hot on the heels of London’s that our works will be a distraction and Lee Tunnel, Crossrail and National Grid the sooner we finish the better), for bill cable tunnels, there never has been a payers and investors (the less time we confidence in Tideway by committing better time to undertake this scheme and take, the lower the overall cost), and for their financing of some £1.3bn. We have it is very encouraging to see so many the environmental and economic health made further progress in securing the ANDY MITCHELL CBE, top class, experienced professionals of the river and London generally. finance for our long-term investment CHIEF EXECUTIVE OFFICER at all levels of the supply chain. The River Thames is a hugely important, programme, with a Revolving Credit There is no doubt that this will be a and in many ways forgotten, asset for Facility (RCF) of £1bn in place, and since vital asset for our capital city. There is our capital city. Usage of the river has year end we have agreed terms for a ‘We see the River however nothing that we will do that will increased significantly in the last decade, £700m European Investment Bank (EIB) be as important as the health, safety but compared to many other capital city loan and bond issues totalling £350m. Thames as a and wellbeing of all the people working rivers the Thames remains underutilised I strongly believe that the people hugely important, for us or who are affected by us, be and underappreciated. By our commitment delivering infrastructure for society will KEY DEVELOPMENTS IN 2015/16 • Formed the Tideway Alliance and that on our sites, on the river, or in the to move as much of our material by do a better job if they are representative • Established the largest newly started delivery. Incentive framework areas of London in which we work. We river as we can (significantly increasing of that society. Through our Encompass and in many ways formed independent regulated established for all delivery partners to intend to set new standards through the freight usage of the river) and by diversity programme we are striving to water company since the industry’s work together collaboratively. Started forgotten, asset for our transformational health, safety and supporting the Port of London Authority’s achieve this in all areas. If the past year privatisation and secured £2.3bn work in West, Central and East areas, wellbeing programme, some details (PLA) establishment of the Thames Skills was focused on setting the company our capital city’ of capital. Licence awarded with the delivery schedule on track. of which you will see in this report. Academy to train a new generation of over and the scheme up for success, the by Ofwat in August 2015. • Had our first Revenue Statement The team has done a tremendous job 300 skilled and qualified river workers, we coming year will be the first and most • Established a clear vision and submission accepted by Ofwat. First over a number of years, successfully intend to demonstrate how valuable the influential one in enabling the safest and values, reflecting the legacy payment on its way from Thames securing planning approval and establishing river can be to commerce and transport earliest delivery. Through the unarguable we aim to leave for London – Water’s wastewater customers. a robust plan and budget, which culminated in London. This will result in less traffic on strength, experience and commitment ‘Reconnecting London, and • Community Liaison Working in the granting of the licence to Tideway to London’s roads, benefiting the environment of the team, I am confident that Tideway Londoners, with the River Thames’. Groups launched. Actively operate as an independent regulated water and reducing the risk of road-based is set to have a successful year. ● • Established our transformational developing relationships with company in August 2015. The same day, incidents. By removing the sewage health, safety and wellbeing our neighbours – more than 20 we awarded the main works contracts and overflows into the river, we intend to programme. No injuries or lost meetings held across the West, we have worked hard since, as we brought change the common perception of a dirty time incidents in 2015/16. Industry Central and East areas. a new company into existence, to develop river into one where Londoners and visitors recognition for our Employee Project • Financing locked-in after the design and construction thinking to see the Thames as a joy to be near and on. Induction Centre programme year end. Secured a £700m EIB deliver the best result possible for the Our challenge is to build a tunnel to – innovative training designed loan and bond issues totalling environment, people living close to our remove the sewage from the river, and to ensure we work safely, with £350m. (Picture: Marking construction sites, bill payers and investors our vision is ‘Reconnecting London, and over 2,500 people attending. agreement of the loan with EIB) alike. Through the Alliance framework that Londoners, with the River Thames’. Our Andy Mitchell CBE, includes our main contractors, Thames shareholders have demonstrated their Chief Executive Officer
6 TIDEWAY ANNUAL REPORT ANNUAL REPORT TIDEWAY 7 Who We Are and What We Do
A newly formed independent regulated water company, financed by private capital, established to intercept sewage otherwise destined for the tidal River Thames
‘A sewerage system that is able to meet its needs has been the backbone of London’s success over many decades’
azalgette Tunnel Limited, trading The shareholder group comprises: under the name of Tideway, began Boperating as an independent regulated water company when, in August 2015, Ofwat awarded us our licence to design, build, commission and maintain the Thames Tideway Tunnel. The 25km tunnel beneath 34.26% 33.76% London, which has been dubbed the ‘super sewer’, will store and transfer tens of millions of tonnes of untreated sewage each year that currently pollutes the tidal River Thames. 10.66% British money is helping to deliver this vital 21.32% piece of infrastructure, which is fundamental to London’s success. The tunnel is being financed by the private sector, giving Allianz more than 1.7 million UK pensioners an Dalmore Capital Limited indirect investment in Tideway, through INPP & Swiss Life pension funds managed by our investors. (managed and advised At licence award, our shareholders by Amber Infrastructure) committed total financing of £1,274m. This DIF Above: Andy backing helps fulfil a key component of HM Mitchell with the Treasury's National Infrastructure Plan, to Doggett’s Men at finance the development of UK infrastructure The shareholders are represented on our Board, Fishmongers’ Hall with the support of private investors. Our with one director each for Allianz, the Amber Left: The Lee Tunnel shareholder group has extensive experience group, Dalmore and DIF. More information can was completed of investing in and managing a wide range of be found in the Corporate Governance section by Thames Water of this report, on pages 54 to 55 in early 2016 infrastructure assets in the UK and overseas. ›
8 TIDEWAY ANNUAL REPORT ANNUAL REPORT TIDEWAY 9 Who We Are and What We Do
Continued ▲ ▲ ▲ 2m 4m 8m 10m
during heavy storms. In Victorian times, London Population Growth this happened once or twice a year. The current lack of capacity means that the network is regularly overwhelmed, resulting in discharges in recent years averaging (based on a typical year) once a week and around 39 million cubic metres of sewage per year entering the tidal section of the Thames. Did you know Sir An independent study, which concluded in 2006, assessed the environmental impact Joseph Bazalgette’s of these discharges and proposed the London Tideway Improvements Programme. brick sewers are This has three main components: • upgrades to the five sewage treatment made up of 318 works that discharge to the tidal million bricks all River Thames, which were completed by Thames Water in 2015; LONDON TIDEWAY laid by hand? • construction of the Lee Tunnel, which 1860 1920 2014 2030 IMPROVEMENTS PROGRAMME runs from Abbey Mills Pumping The network of sewers built by Sir Joseph Station to Beckton sewage treatment Bazalgette in the 1860s still forms the The total estimated cost is £4.2bn. Ofwat THE ROUTE through the Lee Tunnel to the Tideway works, and was completed by backbone of London's sewerage system. has set a regulatory baseline of £3.1bn The majority of the tunnel, which runs Pumping Station, to be pumped to Thames Water in early 2016; and Constructed when London's population was for Tideway’s element of the programme from the Acton Storm Tanks in West Beckton Sewage Treatment Works. The two million and designed to cope with four • construction of the larger Thames (in 2014/15 prices), with the rest delivered London to the Lee Tunnel at Abbey Mills tunnel’s design will make it self-cleansing million, the system now struggles to serve Tideway Tunnel, which will by Thames Water. The impact on in East London, will be under the River and minimise ongoing operational and a city of more than eight million people. connect to the Lee Tunnel. Thames Water customers’ annual bills Thames. The flow from over 30 CSOs will maintenance requirements during its London’s current sewerage system Thames Water is responsible for is estimated to be around £20-25 per be diverted from the existing sewerage expected life of at least 120 years. includes 57 combined sewer overflows developing the Thames Tideway household, before inflation, by the mid- network into the main tunnel, where it The construction of the tunnel will (CSOs), designed to allow the release of Tunnel, acquiring land, and 2020s, considerably lower than the £70-80 will continue to flow by gravity to the Lee require works to drive the tunnel using excess sewage flows into the River Thames enabling / interface activities. per household originally estimated. Tunnel connection. From there it will run tunnel-boring machines and to intercept ›
25 7.2 66 1.24m 120 24 kilometres long metres wide metres deep cubic metres capacity years design life construction sites
Travelling from west to east The main tunnel will have an internal The tunnel needs to fall one metre The tunnel will be able to store The design of the tunnel will Of the 24 sites, 11 are on the London, the main tunnel will diameter of 6.5 metres between every 790 metres so it can be 1.24m cubic metres of sewage for mean it will last for at least the foreshore of the river. Sixteen sites be 25km long. Two connection Acton Storm Tanks and Carnwath self-cleaning. Starting from transfer to treatment. That is the next 120 years. intercept one or more CSOs, and Road Riverside. It will have a 7.2 30 metres deep at Acton Storm tunnels will be 4.6km and equivalent of 50 Olympic-sized there are five sites dedicated metre internal diameter at Abbey Mills Tanks, it will finish 66 metres deep swimming pools. 1.1km long. Pumping Station. The Greenwich at Abbey Mills Pumping Station. to the construction of the connection tunnel will have a 5 metre connection tunnels. internal diameter and Frogmore connection tunnel will be 2.6 metres.
10 TIDEWAY ANNUAL REPORT ANNUAL REPORT TIDEWAY 11 Who We Are and What We Do The tunnel generally follows the River Thames from Acton to Limehouse, then continues north-east to Abbey Mills Thames Tideway Tunnel Pumping Station where it will connect to the Lee Tunnel
Abbey Mills Pumping Station Lee Tunnel Beckton Sewage TOWER HAMLETS Treatment Works