ANNUAL REPORT 2018/19 Contents About us 01 Tideway Highlights Bazalgette Tunnel Limited, 03 Strategic Report 05 Chairman’s Introduction trading under the name 06 Chief Executive Officer’s Report 08 Our Vision, Purpose & Values Tideway, began operating as 10 Who We Are & What We Do 18 Our Business Model an independent regulated water 20 Our Strategy 22 Our Performance company in August 2015, when 60 Financial Performance Review 66 Risk Management Ofwat awarded us our Licence 72 Long-Term Viability Statement to design, build, commission, 77 Governance 79 Chairman’s Introduction finance and maintain the 80 Board Leadership, Transparency and Governance – The Board Thames Tideway Tunnel. 102 Committee Reports Cover to be designed 126 Relationship with Shareholders 130 Directors’ Report Since Licence Award, 133 Financial Statements 134 Independent Auditor’s Report our shareholders have 138 Financial Statements 142 Notes to the Financial Statements invested £1.3bn. 161 Regulatory Reporting Close to half the total equity 162 Introduction 166 Regulatory Accounting Statements has come from UK investors, 182 Risk and Compliance Statement 183 Condition K Reporting including many pension funds, 184 Data Assurance Summary 186 Auditor’s Report giving over 2.9m UK pension 192 Glossary holders a stake in Tideway. Tideway Highlights Our year at a glance Objective Highlight Recognition • No signifi cant injuries Britain’s 3rd Healthiest • 167 volunteer mental health fi rst Workplace and most improved aiders across the entire project overall for medium size companies Multi award winning innovative health and safety training facility (EPIC - Employer’s Project & Wellbeing& Health, SafetyHealth, Induction Centre)* • On track to Handover EDIE sustainability by March 2024 awards ‘Mission Impossible: • Costs expected to be £3.8bn Mobility’ category for (vs £3.5bn regulatory baseline) More by River strategy • More by River strategy keeps & Quality 68,000 HGV movements off London’s roads Schedule, Cost • 90% of live legacy commitments Evening Standard on track against a target of 75% Corporate Citizen • Community investment of the Year for programme benefi tted community investment c9,000 people & Reputation & Vision, Legacy • 94% of staff said ‘Tideway The Times Top 50 is socially responsible’ Employers for Women • 92% of staff said ‘Tideway values and promotes diversity’ Tideway CEO Andy Mitchell named as a fi nalist in the Gender Champion Award category & People & Company • Implemented Treasury4Good award for green bond platform Best Corporate Sustainable • Secured liquidity to Finance Solution end of construction Joint highest ever evaluation for green bonds (Standard and Poors) Financing 92% of stakeholders surveyed were positive toward Tideway * EPIC won a series of awards, including Health, Safety and Wellbeing Initiative of the Year at the British Construction Industry Awards, the Ground Engineering Awards ANNUAL REPORT TIDEWAY 01 Strategic Report 05 Chairman’s Introduction 06 Chief Executive Officer’s Report 08 Our Vision, Purpose & Values 10 Who We Are & What We Do 18 Our Business Model 20 Our Strategy 22 Our Performance 60 Financial Performance Review 66 Risk Management 72 Long-Term Viability Statement Millicent, the first tunnel boring machine to begin work on the main tunnel, being prepared at the bottom of the shaft at Kirtling Street in summer 2018. As of the end of March 2018, Millicent had tunnelled over 1,000m west, past Chelsea Bridge 02 TIDEWAY ANNUAL REPORT ANNUAL REPORT TIDEWAY 03 Looking west over the River Thames, with Tideway’s Blackfriars Bridge Strategic Report Foreshore site visible to the right Chairman’s Introduction solutions in corporate finance. transparency and governance and near These awards reflect the fact that our full compliance with the FRC’s UK Company values are now well embedded Corporate Governance Code, which we in everyday activities and we are achieving explain later in this report. This year our the Board’s vision of the type of company report also sets out the measures we are we set out to be. implementing to enhance our corporate We are also leading the greenfield governance arrangements as we continue infrastructure market with a new delivery to strive to exceed the expectations of model that harnesses low-cost, long-term our stakeholders. private capital to deliver critical I believe Tideway is using new environment-enhancing UK infrastructure. methods and setting new standards SIR NEVILLE SIMMS The shareholders’ decision at licence for delivery of infrastructure projects, NON-EXECUTIVE CHAIRMAN award, to put in some £1.3bn of equity but I also recognise that there is always and loans upfront, helped establish room for improvement. The Tideway Tideway as a well-capitalised utility Reporting Group, independent from am pleased to introduce this, our fourth company investment and has assisted Tideway, was therefore established to annual report, since the establishment us in achieving robust credit ratings and monitor our performance in dealing with I of Bazalgette Tunnel Limited in 2015. competitively priced financing, which now issues like complaints, compensation and We are now well into the delivery phase provides us with all the liquidity we need community relations. I am pleased that the of the project and our teams deserve to take the project through to the end Chairman of the Group recently confirmed acknowledgement for having managed of construction. that Tideway is performing well in these their way through the design and Last year, nearly four years into the areas and in how we address stakeholder construction challenges of our early years, project, we resolved a number of concerns and that we are using the whilst still maintaining momentum on safe significant challenges encountered in lessons learned to inform the remainder of and reliable delivery. the initial, more unpredictable phase. the project and the infrastructure projects As described in more detail in the rest When in April we announced an 8% of the future. of this report, this year has been one of upward revision in estimated costs to This report describes openly and significant progress across all the main complete the project we were, at the same honestly our achievements, the challenges works areas. We have mobilised on all time, able to confirm that there would be we face and the steps the whole team, but one of our 21 sites across London, no change to the estimated annual Board and Executive together, are tunnelling is now well underway with cost range for Thames Water bill-payers, committed to taking to ensure our four of our six tunnel boring machines and that we are now well on the way to continued success. underground and three actively tunnelling. delivering an asset that will modernise Finally, I would like to thank all those During the year our teams have also London’s ageing sewerage network and who work on and with Tideway, including resolved the unforeseen and extremely provide significant environmental benefits our many stakeholders and main works complex challenges at Blackfriars and King to the River Thames for decades to come. contractors, for their commitment to Edward Memorial Park. In the past year scrutiny of the ensuring that we continue to drive the It is very pleasing to report that infrastructure sector has intensified industry forward as we deliver this vitally the culture and behaviours developed in and our stakeholders rightly expect us important project. the Company have been recognised to operate within a framework of strong externally this year. Our staff have won governance that lends confidence to our a number of awards which acknowledge model of private investment and its their achievements over a wide range capacity to deliver value for money. of activities, including our innovative As a company we have always sought approach to health and safety training, to achieve the highest practical levels of supporting diversity in the workplace, good corporate governance and we remain Sir Neville Simms assisting ex-offenders and those currently committed to maintaining our record in this Chairman not in work into employment, providing respect. As in previous years, we continue one of Britain’s most healthy workplaces to report full compliance with the Ofwat and utilising environmentally sustainable principles on board leadership, 04 TIDEWAY ANNUAL REPORT ANNUAL REPORT TIDEWAY 05 Chief Executive Offi cer’s Report Rowing on the Thames by King Edward Memorial Park Foreshore with ‘We have set out ambitious plans Tideway Project Manager and former for the broader benefi ts from the Olympic rower Andrew Triggs Hodge project whether for the health, safety and wellbeing of our staff, the industry we work within, the communities ANDY MITCHELL CBE we engage with, or London.’ CHIEF EXECUTIVE OFFICER On one of the tunnel boring machines at Kirtling Street he 2018/19 business year was Their commitment to the project and We are now fully mobilised and active The year that saw us encounter and The year has seen us continue to another encouraging step for the our values remains outstanding which in on 20 of our 21 sites, and in total we have resolve the two most signifi cant challenges build on our strong fi nancing position. T Company to deliver the Thames part is refl ected by the more than 7,000 22 shafts and 25km of tunnel to build but to date that were the key drivers to the We have secured liquidity to the end of Tideway Tunnel and in doing so create hours volunteered to local causes during before being able to get started on much revised cost estimate that we declared in construction and have implemented a a cleaner and healthier River Thames. the year. of this work we have had to strengthen April 2019, namely the gas main at green bond framework with a high score We are in the peak construction phase and We are committed to keeping our river walls and build new land out into the Blackfriars and the unexpected ground green evaluation by Standard and Poor’s.