Sources close to the £5.5bn M25 widening PFI Design, Build, Finance and Operate (DBFO) contract expect final contracts to be signed and awarded to the Connect Plus consortium later today.
NCE has spoken to several of those involved in the deal. All were preparing to sign the mass of final contract documents in a staggered process over yesterday and today..
One member of the team tying the financial package together confirmed that: “We are working towards a close on Wednesday evening.”
Widening the motorway
Connect Plus comprises Balfour Beatty, Skanska, Atkins and Egis Projects. The M25 concession will run for 30 years and involves widening the motorway at key points from three to four carriageways in each direction. In addition, the existing road will be resurfaced and central reservations and lighting will be replaced.
Two sections of road will be widened − the 35km stretch between junctions 16 and 23 in the north west of London, and the 23km stretch between junctions 27 and 30 to the north-east.
Junctions 5 to 7 and junctions 23 to 27 will not be widened, and instead Active Traffic Management (ATM) or Hard Shoulder Running will be introduced to capacity at peak times.
NCE understands that the invitation to fund the deal is oversubscribed, but there was some worry that banks would cut their loans, introducing a new delay of around two weeks.
“We are very close to awarding the M25 Design, Build, Finance and Operate contract and we expect to make an announcement soon.”
Highways Agency spokesperson
In closing the Manchester waste PFI deal, the Bank of Ireland reduced its contribution at the last minute (NCE 9 April). This forced the new Treasury Infrastructure Finance Unit to step in and plug the shortfall, but this took around two weeks to arrange.
A similar fall-back option is in place for the M25 deal, but at the time of going to press 16 banks had signed up to lend.
No official confirmation that financial close would be reached this week was available as NCE went to press.
But expectations that the deal would close were heightened last week when Balfour Beatty chairman Steve Marshall said the deal would reach financial close “shortly”.
A spokesperson for the Highways Agency would confirm only that: “We are very close to awarding the M25 DBFO contract and we expect to make an announcement soon.”
Turmoil on the financial markets has already delayed completion of the deal by around five months. A revised timetable for the start of construction had been published on 27 April, to ensure the project finished in time for 2012 Olympics.
A Highways Agency spokesman said she expected work to begin “almost immediately” once the deal was signed. Area 5 contract holders Mouchel, Carillion and Le Crossing will continue with their maintenance contracts until 13 September to give the smoothest possible handover.
The European Investment Bank will lend £400M, the remainder coming from 16 banks, according to NCE’s sister publication Infrastructure Journal:
- Barclays Capital - hedging bank
- HSBC - hedging bank
- Lloyds TSB - hedging bank
- Bank of Tokyo-Mitsubishi UFJ
- Bayern LB
- Société Générale