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The M25 Motorway, also known as the London Orbital Motorway, is a 125-mile (200 km) long motorway that encircles almost all Greater London and provides access to important destinations such as Heathrow Airport and Dover Port. One of Europe's busiest motorways, the M25 carries some 15% of all UK Motorway traffic and has had to continually evolve to support the economy since it was originally opened in 1986.
In a bid to radically improve the travel experience, in 2009 the government awarded a 30-year Design, Build, Finance and Operate (DBFO) contract for the M25 and its key arterial link roads to the Connect Plus consortium. The DBFO contract included measures to increase capacity (carriageway widening and hard shoulder running) as well as ongoing responsibility for asset renewal activities and the routine operation and maintenance of the network. The project is now in the Operation and Maintenance stage, with the main construction works completed.
Arup was appointed in 2009 to act as Lenders’ Technical Advisor (LTA) on all aspects of the M25 DBFO. In addition to our role as LTA, we are also delivering selected technical advisory tasks as part of our role on the design framework. We have provided Connect Plus and their operator, Connect Plus Services, with technical advice on a number of challenging structural technical issues that have contributed to the on-going successful operation of this vital transport infrastructure.
Project Summary
10 years of Arup involvement into 30 year-long DBFO contract
£5bnEstimated concession contract value
125 milesof one of the worlds largest ring road
Effective programme management
Our objective from the onset was to provide high quality, timely advice that contributes to the overall effective management of the contract. During construction, Arup performed regular monitoring visits and reported back to Lenders. In the current phase of Operation and Maintenance (commencing from Spring 2015) Arup is responsible for issuing quarterly reports which provide Lenders with information on the project performance and any issues related to risk. While ensuring successful ongoing management of the contract, we are responsible for approving on behalf of the lenders significant areas of investment such as the asset management forward plan, setting out works on the network for the next year, five years and thirty years.
Our technical due diligence has supported and enabled agreement of changes to the contract and our regular reporting has provided Lenders with confidence in the performance of the project. Our regular activity of liaising with all key stakeholders is pivotal to successful collaboration on the project.
“Arup has been extremely supportive and helpful on this transaction and I’ve been very appreciative of the Arup team’s professionalism and turn-around times in pressured circumstances ” Andy Dean CEO M25 DBFO
One of the busiest road networks in Europe, the M25 network underpins the UK economy.
Responding to strategic changes
Arup has provided technical due diligence related to a number of strategic changes on the DBFO network. This comprises agreeing contract changes where there are technical and associated commercial considerations.
We work closely with all parties in order to fully understand the proposals and impact on the contract prior to making recommendations to the lenders. Our due diligence studies include the embedment of the Regional Technology Maintenance Contract (RTMC) into the DBFO contract as well as M3 All Lane Running. Arup will continue to be involved in technical due diligence related to strategic change as there is a significant pipeline of expected changes to the network around Heathrow, Lower Thames Crossing, HS2, Dartford Free Flow Charging, EUD as well as various junction improvements.
Technical Due Diligence of Debt Refinancing
Arup played a key role in the successful re-financing of the M25 DBFO during the summer of 2018. We produced the supporting technical due diligence report and provided thorough and timely responses to queries from the European Investment Bank and other Commercial Lenders. The programme for the refinancing was challenging and, in order to successfully achieve the financial deal, Arup worked collaboratively within a complex group of stakeholders.
The refinancing was beneficial for Connect Plus as well as the Secretary of State, as the original funding for the project was raised during the financial crisis in 2009. At that time, Banks were less willing to lend the necessary funding and were cautious in their approaches. This had the effect of pushing up the project’s cost of debt. However, since 2009 the financial markets have become more buoyant and the cost of borrowing has dropped sharply, enabling the borrower to strengthen their balance sheet through the refinancing. Recent Client feedback reflects Arup’s performance under challenging circumstances on this vital piece of infrastructure for the UK economy.
Our work was recognised at the 2018 IJGlobal Awards, winning European Refinancing Deal of the Year.
“A significant thank-you for all professional first-class support throughout this journey, against extremely demanding timescales. We look forward to our continued relationship with Arup ” Stephen Worthy Director, Deputy Head of UK Project Finance at Balfour Beatty Investments
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