By Lynda Myer
A £30M operating profit has been reported by Ferrovial Construction UK in 2022 that is related to complications at the Silvertown Tunnel project.
As a new twin-bore road tunnel, the Silvertown Tunnel is currently under construction beneath the River Thames between Silvertown and Greenwich, whereas the responsibility of its delivery is up to Riverlinx CJV, a joint venture of Bam Nuttall, Ferrovial and SK Ecoplant, for Transport for London (TfL).
Being responsible for the tunnel’s maintenance and operation after construction is complete, Ferrovial has a 40% share in Riverlinx. The vast majority of funding for the project comes from the private companies, who will recoup during the operational phase.
According to the announcement of its financial results for 2022, Ferrovial stated: “The decision was taken to make a provision for a one-off exception for projected forecast losses due on the Silvertown Tunnel project, principally due to external factors caused by global events, including the Covid-19 outbreak, the war in Ukraine, and the resultant significant inflationary increase in labour and commodity prices. This has resulted in an overall EBIT of -£30M for the year for the whole of the business. The firm made an underlying EBIT profit of £22M across the rest of its portfolio.”
Although during the last year, the capital cost for the project has continually increased, in December 2022 it was reported as being £12M over budget, and this was raised by another £1M just two months later. While the final expected budget is now £186M compared to the original £173M, industry experts estimate the cost will be up to £2bn over the 30-year contract.
Due to a faulty conveyor belt, Silvertown Tunnel encountered a setback in September when there was a fire on site and the project’s tunneling halted for 10 days.
TfL has said the tunnel remains on track to open in spring 2025, though the minutes of TfL’s Programs and Investment Committee on 1 March revealed that it has been pushed back from April to June 2025.
In February, the Silvertown tunnel boring machine completed its first 1.1km drive beneath the Thames and now in order to preparing it for its second drive through an innovative nitrogen skate system engineers on site are rotating it piece by piece.
Considering that the Ferrovial UK’s year-end results show a record revenue of £493M in 2022 and an 8.1% improvement in like-for-like terms on the previous year, the loss on Silvertown Tunnel has not been important.
Ferrovial UK’s order book at the end of 2022 was £795M and its net cash balance increased 9.2% in like-for-like terms to £213M.
Ferrovial UK and Ireland managing director Karl Goose said: “We continue to build to deliver against our strategic objectives which form part of the overall Horizon 24 business plan. The impact of world events on our industry has been unprecedented and certainly came to a head over 2022. Our focus has been on financial certainty and resilience as we face the potential impact of these events with the rest of our industry. We have therefore taken the correct and prudent decision to make a provision for these factors.”
