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Highways Agency to take stake in M25 DBFO

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TAXPAYERS' MONEY could be invested in the privately financed upgrade of the M25, Highways Agency head of procurement Steve Rowsell said last week.

He said the move would help limit the amount of money the contractor would have to put in to top up borrowings needed to fund the £1.2bn scheme.

Banks normally insist on ntractors supplying around 10% of the finance for private infrastructure projects in the form of equity or shares.

For the M25, contractors would have to put in over £100M.

It is unprecedented for the government to supply equity for such large schemes, although smaller projects have been built with a public sector contribution.

Lawyers were sceptical about the advantages of doing so. One said it would create a conflict of interest as the Agency would effectively be client and contractor. And he doubted whether the Treasury would allow taxpayers' money to be used in this way.

Contractors also expressed surprise at the move. They said that much larger deals like the £13bn public private partnership to upgrade London's Underground were funded entirely by the private sector.

Rowsell also unveiled options for the M25 contract.

The Agency favours a single design build finance operate (DBFO) contract, which would widen to four lanes the 102km of road still limited to two or three, plus operation and maintenance of the whole road.

Other options include splitting the DBFO into two or three parts ranging in value from £170M to £1.03bn.

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