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Funding finally in place for £5.5bn M25 mega-deal

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.

Heightened expectations

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.

Source: Highways Agency

How the M25 will be widened

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
  • BBVA
  • Calyon
  • Dexia
  • Helaba
  • KfW
  • NAB
  • Natixis
  • RBS
  • SMBC
  • Société Générale
  • WestLB

Readers' comments (1)

  • The M25 between J5-7 is to be hard shoulder running. There was a scheme to widen to four lanes but the costs per kilometer proved to be nearly double those of the two stretches north of London, even though the traffic volumes are very similar. This extra cost is because of the ground conditions (Gault Clay) and because in many locations the flat cut slopes have been returned to agriculture and the fences are adjacent to the hard shoulder.
    Accepting this short sighted decision for hard shoulder running,when will the concrete barrier/lighting be built (and improved noise fencing)? We local residents have been campaigning for years but the work just slips back and back.
    John M Roe MICE

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