Legal challenge delays Silvertown tunnel FC

12 August 2019 - 12:00 am UTC

The losing consortium in the recently closed Silvertown tunnel tender has challenged the decision of Transport for London to award the GBP 1bn PPP to a Macquarie Capital-led consortium, threatening months of delays.


UPDATED: This story was originally published on 12 August and updated on 13 August to include more details on the upcoming court case.


HOCHTIEF, Iridium and John Laing, which were bidding against a consortium comprising Macquarie, Ferrovial, Aberdeen Standard Investments, BAM PPP PGGM and South Korea’s SK Group, filed their legal claim with the Technology and Construction Court on 7 August, a spokesperson for procuring authority Transport for London (TfL) confirmed.


A hearing date for the case has not been set, said a spokesperson for the Court. The UK High Court of Justice, of which the Technology and Construction Court is part, is now in a period of Summer Vacation that runs until 1 October.


The court spokesperson added that the hearing could wait until October. This would move the financial close of the PPP closer to, or even directly following the UK’s current Brexit deadline of 31 October. A source close to the project said: “Obviously, the closer you get to Brexit the more challenging it will become as there’s more uncertainty and market volatility.”


Financial close of the tunnel was originally targeted for 20 August.


The August 7 challenge has resulted in the automatic legal suspension of TfL’s right to award the contract to Macquarie’s consortium. TfL selected in late May the so-called Riverlinx consortium as preferred bidder for the scheme, which involves building a 1.4km twin-bore road tunnel under the River Thames in east London.


“We are disappointed that our reserve bidder has decided to challenge the outcome of our procurement process,” TfL told Inframation in an e-mailed statement. “We are awaiting further details about the claim and will respond to them in due course.”


The grounds of the claim filed by the Hochtief, Iridium and John Laing consortium were not known at the time of writing.


Although such claims are common in countries including Germany and the Netherlands, one source noted that it is less usual in the UK.


A group of more than 10 lenders, including banks and institutional investors, are supporting the Riverlinx consortium. Lenders were notified of the legal challenge by sponsors as final contract meetings were taking place, said sources.


Silvertown tunnel has faced previous delays due to issues involving the legal consent required to build the tunnel. It was initially expected to open in 2023, but according to the latest TfL update in May, it is due to become operational in 2025.


Hochtief, John Laing, Macquarie Capital, SK Group and Ferrovial declined to comment.


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