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Heathrow rail scheme gives Aecom first private financing foothold

Heathrow Southern Rail image 3to2

Heathrow Southern Rail image 3to2

Heathrow Southern Rail image 3to2

Heathrow Southern Rail line will give Aecom its first private finance infrastructure deal in the UK, New Civil Engineer can reveal. 

In an exclusive interview, Aecom chief executive cities EMIA David Barwell said the consulting giant is to make a “major investment” in the “no brainer” scheme via a design, build, finance and operate (DBFO) model.

The company already uses the model in America, but it has yet to venture fully into it in the UK. Although it has a building in London where it is carrying out the design and build phases, this will be its first move into infrastructure and for all four stages.

Barwell described the Heathrow Southern Rail scheme as a “no brainer” and a perfect entry into the market.

“It allows you to get in there as the private sector and see how we can do it better,” he said. “That’s a large driver for us.

“We looked at various schemes to do that, and this, well, it’s a no brainer as a scheme. It’s a short length, it provides great access and it does more than just serve Heathrow.”

The new 13km line will fill the gap between Heathrow airport and Chertsey to the south following the M25 corridor, with a spur off up to Staines. It will allow passengers living near the Woking line, which goes into the terminus at Waterloo, access to Paddington alleviating pressure at the already congested southern station.

At Heathrow, Barwell said it could punch through its existing underground box, build the line and open by 2024. Its income would be from standard track access charging set by the regulator the Office of Road and Rail (ORR). The track would be owned by Heathrow Southern Rail Ltd with Aecom as shareholders.

According to Heathrow Southern Rail, the capital cost is estimated to be £1.2bn, but Barwell said he did not know yet how much Aecom would invest in the scheme and said the amount depended on the consenting process.

“The challenge is for these types of project is the consenting period. The capital markets on a project such as this exist, but its how you get them to the point where it’s seen as de risked enough that the capital will flow more freely.

“I don’t know the answer to that, because I don’t know how long a piece of string is. That’s why we’re working with government about the consenting period.”

Barwell stressed it was looking to partner with government, but as a private sector company it was looking to do the project more efficiently.

“Can we provide an alternate route that can deliver it faster? A big company like ours, we provide that sort of clout.” he said. “Whether it’s Mark Carne or Michele Dix speaking, there is some momentum building around needing to unlock private sector investment in infrastructure in this country.

“There isn’t the money knocking around and the public purse is stretched.”

The process is currently at an early stage and several issues still need to be “teased out” he said.

One such issue is how it will be allowed to deal with the procurement process. Currently, public sector contracts over a certain value have to published under European legislation, therefore questions still remain over what work Aecom would be automatically entitled to carry out. Despite this, Barwell said there were still a number of roles, such as a shareholder or owners engineer, that it could play.

“OJEU [Official Journal of the European Union] might come in and say you might have to compete the design or construction, that’s all to be worked through,” he said. “But at the end of the day, as shareholders, we can protect our interests as shareholders who let the contract and manage the contracts.

“At the moment there are a number of routes to go down, there’s a route to be a shareholder and you look at the rate of return on that and what fee you could get and then you step out to be a designer and I wouldn’t say there are any one over the other.”

Ultimately he said the ambition is to use the DBFO strategy as a business model going forward.

“We’re pushing government to go as fast as it can,” he said. “We’ve got an easy scheme that we can get up, consented, out, designed, constructed, delivered and operational by 2024.

“We want to partner with government delivering infrastructure where we’ve got real skin in the game.”

Readers' comments (1)

  • A very sensible scheme though of course the idea has been floating around for at least 30 years. Absolutely key to its success is the connection to not just Heathrow but Paddington and possibly beyond. Also it's fundamental this link is in place irrespective of R3, and if R3 does go ahead the rail link should be built in advance. Well done AECOM for steering the initiative- now make it happen!

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