News from Caroline Russell: Tunnel set to cost Londoners £2bn, nearly three times original cost

Darren Johnson AM highlighted earlier cost escalation in the Silvertown Road Tunnel project in 2015, when he queried increases in cost from £600m in 2012 to £750m in 2014. https://www.london.gov.uk/questions/2015/0063 

In 2014, for the main Silvertown Road Tunnel scheme consultation, it was stated that it was estimated to cost £750m https://tfl.gov.uk/info-for/media/press-releases/2014/october/silvertown-tunnel-plans-gather-pace  

In November 2019, when TfL announced the award of the contract a £1bn value was given. https://www.infrapppworld.com/news/financial-close-for-gbp-1bn-transport-project-in-uk 

The most recent figure given in March 2020 was £1.2bn, which TfL have explained as £1bn of project cost plus £200m of financing and contract costs. https://www.constructionnews.co.uk/civils/sectors-civils/silvertown-tunnel-contract-increases-by-200m-10-03-2020/ 

In March 2020, TfL published the Silvertown Road Tunnel Project Agreement as 31 volumes of PDF with no simple summary for Londoners to easily understand the documents. https://tfl.gov.uk/corporate/publications-and-reports/silvertown-tunnel-project-agreement In this set of documents there is a 3 page PDF on the payment mechanism (schedule 20) which has a broken table of contents and says simply “Excluded commercially sensitive information”. 

In May 2020, TfL added a small note to their 200 page official financial statements which gave the first public indication of the scale of TfL payments for Silvertown Road Tunnel: http://content.tfl.gov.uk/tfl.draft-financial-statement-ye.20200331.pdf 

“On 21 November 2019, the Corporation entered into an agreement with RiverLinx Limited for the Design, Build, Financing, Operations and Maintenance (“DBFOM”) of Silvertown Tunnel, connecting the Greenwich Peninsula and the Royal Docks in London. Our financial obligations to make payments to RiverLinx Limited will start once the tunnel is open, currently planned in early 2025 (the ‘Permit to Use Date’). From the Permit to Use Date, the Corporation will make performance-based availability payments, initially at £65m annually and indexed until the expiry date of the agreement in January 2050.” 

On Friday, September 4 TfL published an update to the draft financial statement for their Audit and Assurance Committee confirming these figures and with a note from their auditors Ernst and Young:  

Silvertown PFI  

During the year, TfL entered into an agreement with RiverLinx Limited for the Design, Build, Financing, Operations and Maintenance ("DBFOM") of Silvertown Tunnel, connecting the Greenwich Peninsula and the Royal Docks in London. The financial obligations to make payments to RiverLinx Limited will start once the tunnel is open, currently planned in early 2025 (the 'Permit to Use Date'). From the Permit to Use Date, the Corporation will make performance-based availability payments, initially at £65m annually and indexed until the expiry date of the agreement in January 2050.  

[…]  

This presentation is a judgement as to whether control, risks and rewards have passed to Riverlinx. Our preferred approach would be to have continued to record the asset and record related liability, both to be amortised over the life of the contract, however we have accepted this treatment. on the basis of management's analysis. 

http://content.tfl.gov.uk/aac-20200911-agenda-pack-public.pdf 

Based on the indexed payments going up with inflation annually at current RPI of 1.6%, a possible payment profile up to 2049 (as agreement expires in January 2050) gives a total cost of £1,979m 

In 2018, the Mayor estimated that the cost of disruption at Blackwall Tunnel due to existing traffic was just £10m per year. https://tfl.gov.uk/info-for/media/press-releases/2018/may/tfl-granted-powers-to-progress-with-silvertown-tunnel