Innovative financing and operational handover: Thames Tideway nears go-live

This year, one of the wettest Septembers on record triggered flood warnings across the country. In London, the river Wandle burst its banks and caused huge damage to AFC Wimbledon’s stadium. But for the team at Thames Tideway, wet weather is just another factor in a project testing pathway towards full operations next year.

On 18 September, London Mayor Sadiq Khan visited Tyburn Quay (opposite the London Eye), one of seven new riverside public spaces created by the super sewer project’s construction works. He was committing the capital to a 10-year programme, building on Tideway’s example, to clean up all of London’s rivers.

“The Thames and its tributaries are the lifeblood of London, and we have a once-in-a-generation opportunity to restore waterways and create a future where our rivers are clean, safe and truly for everyone,” Khan said.

Tideway can’t come online too soon: according to City Hall data, five times more sewage flowed into London’s rivers in 2023 compared to the previous year. The broader London Tideway Improvements will reduce sewage discharge in the tidal Thames by around 95%, and future works will also prioritise natural solutions for cleaning up the river and its tributaries, including new reed beds and even the re-introduction of beavers.

Cash flow for good

The Secretary of State for Environment, Food and Rural Affairs, Steve Reed, was also at the event. He said that funding for vital infrastructure like the Tideway project will now be ring-fenced so that it can only be spent on infrastructure upgrades, not bonuses or dividends, thanks to the proposed Water (Special Measures) Bill.

In fact, Thames Tideway had already been a pathfinder for new forms of project finance that address those very issues, with a structure separate from Thames Water and a direct connection between consumers and project finance via the regulated asset base (RAB) funding model. Ofwat is expected to confirm national bill increases of around £19 a year to raise £88bn for sewage and waterway improvements, a huge boost to project war chests.

And while the seven new riverside public spaces are a highly visible part of the project’s legacy, the funding models it used should change the way large projects are financed, too. For example, the performance of the green bonds issued by Bazalgette Finance, Thames Tideway’s financial arm, are driven by sustainability KPIs and have proved a game-changer in project operations.

The KPIs are rigorous and audited, with monthly reports from contractors.

“We got planning consents more than 10 years ago, and the world has moved on a lot – especially around the appetite for green investments and the measurement of sustainability impact,” legacy lead Samantha Freelove told APM’s Project journal.

“So, we take a very quantitative approach to these outcomes – including mapping our own targets onto the UN Sustainable Development Goals.”

Embedding these metrics into the contracts also meant having qualified experts in place at the contractors to evaluate and certify performance. “Tideway paid for people in main contractors to help that happen and ensure consistency,” Freelove said. “They’re full-time and dedicated to the project. We’ve also had separate legacy teams around skills and employment, plus the environmental side.”

Other lessons learned

The other big shift that is underway at Thames Tideway is the transition from infrastructure to operations. It’s a lesson former project director Andy Alder learned from Crossrail: a programme office shouldn’t just handle the coordination of different project teams. It has to address the temporal shift as the project matures – in this case, from digging to operations. It’s an area of governance the Elizabeth Line project post-mortem picked up on.

“One way we did that was to evolve the role of the chief technical officer,” Alder told Project. “It started off with a design remit, offering assurance that the infrastructure could be delivered as planned. Then, halfway through, that shifted to ensuring we could do the operational handover – operational readiness was explicit in Roger [Bailey]’s role.”

The definitions for the interfaces between contracts – literally, where the different projects intersected underground – was also a big lesson from Crossrail. “The alliance was programme-wide, but keeping an eye on the incentives was critical, ensuring they were aligned behind the programme and not their own commercials,” said Tideway Programme Director James Smith.

“Project managers have been instrumental in securing those. Their ability to report independently to the client was so valuable.”

That kind of coordination – not just across projects within the same organisation, but across different partners in the public and private sectors – will be key to delivering Khan’s 10-year programme of improvements.

Read more about the Thames Tideway project in the autumn 2024 issue of Project journal

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