The Lower Thames Crossing (LTC) has outlined potential different private financing options available to bring the project forward, including a semi-private option that would see its total anticipated cost increase to £10.2bn.
A decision on whether to grant a development consent order (DCO) application for the major road and tunnel scheme between Kent and Essex is still pending, with a deadline of 23 May for the government’s decision.
In updates to the DCO application, the LTC team has now outlined how it intends to incorporate the potentiality of the project being privately financed, either wholly or partly.
One of the private financing options presented is the opportunity for a fully regulated private equity funding.
The other option is for the 4.2km tunnel within the project to be fully publicly funded while the nearly 20km of new roads that will support its use to be funded through a private finance model. In this case, the connecting roads that would be delivered and funded by the private sector under Design, Build, Finance, Operate and Maintain (DBFOM) contracts.
Currently, the LTC project, which will see creation of 23km of new road connecting the A2 and M2 in Kent to the A13 and M25 in Essex, featuring a 4.2km tunnel under the River Thames, is anticipated to cost at least £9bn. The updates to the DCO application documentation state that £1.2bn has been spent on the project so far.
Under the public tunnel, DBFOM Roads option, LTC the cost would be £10.2bn, including historical costs. This includes a £9bn total capital funding required from this year onwards, made up of £4.7bn of public funding and £4.3bn of private funding.
This extra £1bn added onto the estimated total costs would include approximately £350M relating to the DBFOM procurement and management of the interface between the tunnel construction (carried out by the government) and the DBFOM special purpose vehicle. It also considers an extra roughly £650M because of a different costing basis for construction and financing under the DBFOM due to it taking construction risk under a fixed-price contract.
The total expected capital cost under the full regulated private equity funding model is £9.4bn. This includes the £1.2bn already sunk into the project and a further £8.2bn total capital funding from now onwards.
It is estimated approximately £1.9bn of the £8.2bn would be from RIS funding of National Highways, which would cover pre-construction enabling works for the entire project up to the completion of the regulated private entity transaction, including utility diversions and design work up to a developed scheme design. It further incorporates an allowance for compensation payments in respect of compulsory acquisitions of land and delivery of the economic regulatory regime for the project, including the establishment of an independent economic regulator.
The remaining £6.3bn of funding would be funded by private investment raised by the regulated private entity and would cover full construction of the project including any pre-construction enabling works not undertaken prior to financial close.
Within its updates to the DCO application, LTC says it considers there is likely there will be a market interest for the regulated private entity delivery option and that recent market activity suggests there is strong “market appetite” for delivery of capital projects in the UK via this model, citing Thames Tideway Tunnel and Sizewell C as examples.
If this model is chosen, it states an economic regulatory regime would need to be established. This would allow an independent regulator to set an allowed revenue for the regulated private entity to cover its operating and financing costs.
New primary legislation is considered to be required to facilitate the regulated private entity model, should this delivery model be pursued.
Road user tolls
As part of its updates to the DCO, LTC has included further information related to the planned tolls for the use of the tunnel.
With both the full public delivery model and the public tunnel and DBFOM Roads model there is no link between the road user charge and the funding for the project. In both models, the revenue from the road user charge would go to the government.
Under the regulated private entity model the same charges would apply at both the A122 Lower Thames Crossing and the Dartford Crossing but the regulated private entity would collect the revenue from user charges from both crossings to cover its operating and financing costs. This would be regulated by an independent economic regulator.
Main works contracts awarded on the project
The LTC project has been broken up into three main works packages:
At NCE Tunnelling Conference in December 2024, BMJV project director Antoine Schwob provided more details about how the project intends to use Europe’s largest tunnel boring machine to drive the six-lane tunnel.
LTC was contacted for comment.
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