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UPDATE 1-Allianz preferred bidder for London's "super-sewer"
July 14, 2015 / 2:09 PM / 2 years ago

UPDATE 1-Allianz preferred bidder for London's "super-sewer"

(Adds details on buyer consortium)

FRANKFURT, July 14 (Reuters) - A consortium led by German insurer Allianz has been selected as the preferred bidder for a 4.2 billion pound ($6.5 billion) investment in London’s new so-called “super-sewer”.

The 7.2 metre (23.6 ft)-wide and 25-km (15.5 mile) long tunnel, which will run up to 65 metres below the River Thames, is aimed at reducing the tens of millions of tonnes of sewage that overflow into London’s River Thames every year.

The Allianz-led group bidding for the landmark Thames Tideway Tunnel also includes investors Amber Infrastructure, Dalmore Capital, INPP, DIF and Swiss Life Asset Managers.

The structure of the deal, developed by Thames Water, the government and water regulator Ofwat forms a potential blueprint for other major infrastructure projects, Allianz said in a statement on Tuesday.

Thames Water, the utility, opted for the deal structure - an external consortium financing and organising the works - viewing it as being more cost effective and providing a maximum in transparency, it said in a separate statement.

According to a person familiar with the deal, the government is open to using a similar set-up in the construction of a third runway at Heathrow airport, if that decision is finally made.

“Thames Water could have done the financing on their own but Ofwat was very keen to create competition for the provision of capital”, the person said.

The Allianz consortium, advised by RBC and Evercore, beat a Deutsche Bank, RBS-advised consortium comprising Universities Superannuation Scheme, Borealis, M&G’s Infracapital unit, and Innisfree.

The UBS-led process to provide investment for the Thames Tideway Tunnel was formally launched in spring 2014 with construction work due to begin in 2016 and to be completed by 2023.

Thames Water is also running a process to select the contractors who will build the project.

Preferred bidders were announced in February: a joint venture of BAM Nuttall, Morgan Sindall and Balfour Beatty for the Western section, a joint venture of Ferrovial Agroman and Laing O‘Rourke for the central piece and a joint venture of Vinci and Bachy Soletanche for the East contract. ($1 = 0.6469 pounds) (Reporting by Arno Schuetze and Freya Berry. Editing by Jeremy Gaunt)

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