The final cost of London’s supersewer could be as much as £900 million above the original regulatory baseline of £3.4 billion, rising to £4.3 billion by completion in 2024 in the worst case scenario, according to the 2019-20 Annual Report published by Tideway, the company building the supersewer for Thames Water.

The current estimated cost increase to £3.9 billion compares to Ofwat’s regulatory baseline of £3.4 billion (£3.1 billion in 2014/15 prices). For what the Board describes as its “plausible downside” scenario, it modelled a 9% increase in the remaining costs to complete, taking the total to £4.1 billion.

The Board says this is consistent with its most recent internal scenarios. However, in the worst case scenario it considers a severe downside case to be a 24% increase in the remaining costs to complete, which equates to a total cost of £4.3 billion.

The report says:

“Both our plausible downside and severe downside cost increase cases include the estimated impact of COVID-19, making reasonable assumptions about the ability of the company to agree the most appropriate cost allocation with our stakeholders.”

This year has seen the project pass the halfway mark, with more than 14km of the 25km tunnel under the River Thames now constructed and 16 of the project’s 21 shafts now fully excavated.

However, delivery has been impacted by the coronovirus emergency - Tideway paused all non-essential construction activity in line with public health guidance at the start of the Covid-19 lockdown.

Since then, detailed site-by-site safety reviews have been carried out and social distancing measures introduced to allow work to safely restart.

Tideway is now assessing the full impact of the pandemic on the timetable and costs of the project in discussion with its contractors and Ofwat and expects to report on this in more detail later in the year.

The final phases of the project have required very close collaboration with Thames Water - Tideway launched a new joint-approach to guide the partnership during the year. Preparations on the last section of tunnel, the east, are now well underway and Tideway has started the detailed planning for the completion of the project, including how it will ‘hand back’ the sites and preparedness for commissioning.

By year-end the company had revised estimated cost at completion upwards by three per cent to £3.9 billion to reflect the commercial performance of the year and the Board’s best views of remaining costs. Tideway said it currently remains on track to deliver all works by 2024. However, the target date for handover has been put back from quarter one to quarter two in 2024.

Chief Executive Officer Andy Mitchell commented:

“Whilst the pandemic will inevitably have an impact on our schedule and costs, our solid performance in this and previous years means we are in a strong position to respond to this unprecedented shock.

“We are now working through our detailed assessment of the impacts, working with all stakeholders including our contractors and our regulator, and we will publish more detail later this year.”

Chairman Sir Neville Simms said:

“Our model of infrastructure funding has a vital role in the investment our country needs and, in the face of continuing challenges in the economy, our success will be a strong signal to promoters, investors and government.”

“While the pandemic may have created an highly uncertain environment for delivery, it is still clear that the tunnel remains a vitally important project for London and the supply chain involved in building it and, with the cooperation of our stakeholders, we are determined to finish it as quickly and as cost effectively as we can.”

Once the worst of the pandemic is over the Board intends to establish a new schedule to completion and update all interested parties.

Click here to read the tideway Annual Report 2019-20 in full.