Reconnecting London with the River Thames
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RECONNECTING LONDON WITH THE RIVER THAMES ANNUAL REPORT 2017/18 Contents Vision and Purpose 03 Strategic Report Tideway is an independent regulated 05 Chairman’s Introduction water company, with a vision to reconnect 06 Chief Executive Officer’s Report London with the river Thames. 09 Who We Are and What We Do 16 Business Model 20 Reconnecting London with the River Thames We will achieve this vision by delivering the 22 Our Vision and Strategy Thames Tideway Tunnel, a major new sewer 26 Risk Management 32 Long-Term Viability Statement which is urgently needed to protect the tidal 36 Performance Review River Thames from pollution. 59 Financial Performance Review 65 Governance The tunnel is the largest project in the water 67 Chairman’s Introduction sector since the construction of Sir Joseph 68 Board Leadership, Bazalgette’s interceptor sewers in the 1860s. Transparency and Governance – The Board It is being financed by the private sector, 90 Audit Committee Report with half the equity provided by UK investors. 94 Remuneration Committee Report This includes a large number of UK pensioners, 104 Board Leadership, through investment by major pension funds. Transparency and Governance – Relationship with Shareholders We aim to deliver on time and budget, at the 108 Directors’ Report right quality. The health, safety and wellbeing 111 Financial Statements of our people and the public are paramount 112 Independent Auditor’s Report – we intend to work safely or not at all. 116 Financial Statements 120 Notes to the Financial Statements We are working closely with our local stakeholders in delivering the tunnel, delivering 137 Regulatory Reporting benefits for them, our investors, Thames Water’s 138 Introduction 142 Regulatory Annual Performance bill payers and the environment. Collaborative Report working is critical to ensuring that we leave a 154 Transfer Pricing Information 156 Risk and Compliance Statement positive and lasting legacy for London. 157 Condition K Reporting 158 Data Assurance Summary 160 Auditor’s Report 165 Glossary 2017/18 Highlights 2017/18 has seen Tideway make good progress towards its ambition to safely deliver the Thames Tideway Tunnel at best value and for the longer-term benefit of London. Some of our key achievements this year included: Health, Safety and Wellbeing Company and People • Zero major injuries in the year. • Employee engagement and enablement has improved • Continued development of transformational Health, Safety for the third year in a row. and Wellbeing (HSW) with a variety of new initiatives, • Fully delivering on our commitment to be a modern including new safety induction training for vehicle drivers, employer, through flexible working initiatives, supporting to protect vulnerable road users. inclusivity, and having over 99.6% of people on the project paid at or above the London Living Wage – with plans in place to resolve cases of non-compliance. Schedule, Cost and Quality • Corporate resilience improved through activities such • Remain on track to deliver the project to both time and as enhancing our assurance process and conducting our regulatory baseline cost. incident/crisis management exercises. • Mobilised onto 20 out of 21 sites and over 1,800 people. • Recognised by Business in the Community as one • Three tunnel boring machines (TBMs) on site and ready of ‘50 workplaces in a class of their own striving with tunnelling starting late 2018. for gender equality’. Vision, Legacy and Reputation Financing • Approximately 20,000 heavy goods vehicle loads removed • Regulatory Capital Value of £1,043.4m in outturn prices, from our roads due to our use of the river. as at 31 March 2018. • Successfully piloted a variety of innovations, including • Sufficient long term financing locked in to beyond System an electric hydrofraise, which reduces noise and emissions Acceptance through £1.05bn total issued during the year. and high visibility low entry cabs, which improve road • Largest corporate sterling issuer of green bonds through user and worker safety. £450m of green bonds raised, with an additional £325m • Completed more than 2,500 STEM education volunteering post year end, taking total to £775m. hours and more than 7,000 community volunteering hours. • Largest UK CPI-linked issuer and managing our regulatory • Well on the way to delivering our legacy commitments. position with £275m of CPI-linked debt raised during • Extended our stakeholder reach through a variety of new the year, with an additional £75m post year end. mediums, including launching social media channels and • ~3x over-subscribed £250m debut public bond issue. a publication informing local residents of progress across • Diversified our investor base with a £300m the project. US private placement. ANNUAL REPORT TIDEWAY 01 02 TIDEWAY ANNUAL REPORT Strategic Report 05 Chairman’s Introduction 06 Chief Executive Officer’s Report 09 Who We Are and What We Do 16 Business Model 20 Reconnecting London with the River Thames 22 Our Vision and Strategy 26 Risk Management 32 Long-Term Viability Statement 36 Performance Review 59 Financial Performance Review Rachel, Tideway’s first TBM to arrive in London, and the lifting of the machine’s cutterhead at Carnwath Road in Fulham ANNUAL REPORT TIDEWAY 03 04 TIDEWAY ANNUAL REPORT Strategic Report Chairman’s Introduction Resilience in our financial situation Andrew Cox also joined the Board as and in our ability to deliver the project the shareholder director for Allianz has been a cornerstone for Tideway and Infrastructure Luxembourg I S.a.r.l., in attractive market conditions mean that place of Jaroslava Korpanec, who stood we have continued to secure keenly down in March with our thanks for her priced deferred funding for future years, contribution to the establishment of improving upon the provenance of our Tideway and best wishes for the future. borrowing and on terms that provide better During the year, we announced that value for bill payers and investors alike. our CFO Mark Corben has decided to Governance Project of the Year award Rarely has there been a more important leave Tideway in 2018 to move on to new in November 2016, which celebrates the time for the industry to look to emerging challenges. On behalf of Tideway I would highest standards in governance and SIR NEVILLE SIMMS technologies and innovation to find like to express my gratitude to him for rewards organisations, teams and NON-EXECUTIVE CHAIRMAN smarter, better ways of delivering and the important contributions he has made individuals for exemplary achievements. maintaining infrastructure, and we are through the development of the delivery Through our Liaison Committee and t has been another very busy year proud of the role that Tideway has model, the establishment of the company, the Thames Tideway Tunnel (TTT) Forum, for Tideway, with good progress being played in anchoring and developing and the successful delivery of the financing we maintain an open dialogue with our I made on all fronts, as you will see the Infrastructure Industry Innovation strategy. We wish him well for the future. key stakeholders – including government, throughout this annual report. The benefit Platform (i3P) as well as leading by The Board has undertaken a search for regulators and local bodies affected by of having started with a clean sheet of example through our “The Great Think” our new CFO and we expect to be able our works. We make a considerable effort paper means, of course, that we have in-house innovation programme. to announce an appointment shortly. to meet local residents, to understand been able to determine what sort of Increased scrutiny by both the All of the great things being achieved concerns they may have and to mitigate company we want and intend to be, Secretary of State for the Environment by Tideway enjoy the wholehearted these where possible. but I am nonetheless impressed by the and our economic regulator Ofwat reflects support of the Board, our shareholders As well as leaving a lasting legacy of a challenging stance that the executive legitimate public interest in the delivery and independent non-executives alike and clean and healthy river, the company will team has taken on such important issues of water services at a price that represents we are all fully committed to seeing that the generate new riverside public spaces and as health, safety and wellbeing, on excellent value for money. The competitive high standards achieved to date continue facilities for our capital. In November 2016, consideration for our neighbours, in caring tender for the ownership of Tideway, and evolve through what promises to be alongside Transport for London (TfL), we for the environment and on setting up a overseen by Government and Ofwat, another exciting, productive and, we opened a new public pier at Blackfriars, resilient project and corporate platform has already delivered significant benefits intend, safe year. with double the capacity of the previous to support the best value for money to customers in terms of the cost of one. I am sure this will play its role in timetable to completion possible. capital and hence the impact on bills. increasing the use of the river, which Step-changes in performance seldom Our aim as a Board is to continue we are keen to encourage. happen without a clear vision and a to ensure that costs to customers are I want to thank all concerned for the resolute commitment to doing things minimised through the timely and efficient Sir Neville Simms, successful year covered by this report. better, and Tideway’s efforts on delivering delivery of the construction programme Chairman It was exactly what was needed to a transformational approach to health, while also balancing the interests of all establish a firm platform for the critical safety and wellbeing very much fall into this stakeholders through our governance, year ahead, in which production from category. Our award winning, mandatory, strategy and financial arrangements.