The Chief Executive and Chief Operating Officers of Tideway have been paid an extra £349,000 by mistake, according to the company’s Interim Report and Financial Statements for the six months ended 30 September 2020 published yesterday.

Bazalgetter Holdings, which trades as Tideway, was established to design, build, commission, financing and maintaining the Thames Tideway Tunnel.

Chief Executive Officer Andy Mitchell and Chief Operating Officer Mark Sneesby were overpaid in September by £206,000 and £143,000 respectively – both men have agreed to give back the overpayment in full by the end of the year.

The report states:

“In September 2020 the CEO and COO received an overpayment in relation to the deferred element of LTIP [long-term incentive plan] Tranche 1 which was awarded in the prior financial year.

“This overpayment was due to an administrative error which resulted in the CEO and COO being overpaid £206k and £143k respectively.

“The Directors have agreed that the overpayment will be re-paid and fully recovered before the end of this financial year.

“The total balance outstanding at 30 September 2020 was £349k. We have reviewed our internal controls in this area and as a result have implemented changes to improve the strength of these controls which will prevent such incidents occurring again.”

Total project costs for the six-month period were £316.8m, taking the total capitalised costs relating to the tunnel at 30 September 2020 to £2,910.7m.

The Key Dates and Estimate at Completion (EAC) were revised in the first quarter to cater for the forecast impact of Covid-19 on the delivery of the works. In August, the company updated its cost and schedule estimate taking account of the impacts of the pandemic. The EAC estimate, which added nine months to the programme and £233m to costs, is confirmed in the interim report, with no additional cost or programme changes. The project is expected to cost £4.1bn and will be completed in 2025.

Tideway has confirmed that there will be no change to the estimated £20-25 annual cost range for Thames Water billpayers.

Start of Commissioning is forecast to commence in September 2023 and handover in March 2025 - this represents a circa nine month delay against that reported in the 2020/21 Business Plan.

Tideway has attributed the delay to a slowdown in productivity due to the essential Covid-safe measures (including social distancing) in place on sites. The dates are based on an assumption that these measures continue to have an impact until May 2021.

However, the report says production has since increased to near pre Covid-19 levels, ultimately mitigating significant potential cost and schedule increases above those forecasted.

Construction activity on the project is now over 60% complete - with 65% forecast to have been completed by the end of the financial year - although this is behind the original expectation of 70% completed for the period due to Covid-19.

One tunnel boring machine (TBM) is currently tunnelling with the last two of the six due to start tunnelling in the second half of this financial year. Tideway has successfully excavated 19 shafts with only two remaining.

Secondary lining works on the West and Central contracts are forecast to commence in the second half of this year and are key activities that support the critical path to commissioning.

Tideway’s credit ratings were affirmed at Baa1 by Moody’s and BBB+ by Fitch. Moody’s changed the outlook to negative following the operational update to investors on the impact of Covid-19 on cost and schedule published in August.

Tideway and Thames Water are continuing to work together to deliver their joint approach, developing the requirements and working relationships for the handover and acceptance phase, according to the report.

Commenting on the results, Tideway CEO Andy Mitchell said:

“Having to manage the progress of works during the pandemic has been a challenge beyond anyone’s expectations. Keeping our staff well both physically and mentally has been our first priority and secondly ensuring we continue with our task of cleaning up London’s river.

“We have achieved some major milestones so far this year, with the completion of the main tunnel drive in the western section and the central section drive due to complete before the end of this month. We have also continued to use the river to deliver the project, reducing our presence on London’s roads and helping with our overall ambition of minimising our disruption to the local communities in which we work.”