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UK pension funds among winners of £4.2bn London infrastructure project

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An asset manager partnered with the UK’s Pensions Infrastructure Platform (PIP) has helped form a winning consortium on a large-scale London infrastructure project.

Dalmore Capital, the first asset manager to invest PIP money via a series of public/private partnership (PPP) equity investments, is part of the Bazalgette Consortium that will finance the £4.2bn (€5.9bn) Thames Tideway Tunnel (TTT) – an upgrade of London’s ageing sewer network.

Earlier this month, PIP investors made a £370m co-investment alongside Dalmore, in addition to the £500m in Dalmore’s PPP Equity PiP fund – taking total commitments associated with the platform to more than £1bn.

Dalmore said it secured £440m of commitments for its TTT fund from a number of UK pension funds and a small number of European investors. 

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IPE understands PIP investors accounts for the majority of the UK investment.

The PIP, set up by the UK National Association of Pension Funds (NAPF) to channel investment into UK infrastructure, declined to comment. 

In addition to Dalmore, the consortium included Allianz Capital Partners, Amber Infrastructure Group, DIF and Swiss Life Asset Managers.

The PIP’s involvement in Dalmore’s TTT fund represents its first foray into UK development infrastructure after focusing on PPP equity and solar investments since the first investment in 2014.

Seven founding pension fund investors, including the Pension Protection Fund (PPF), the Railways Pension Scheme and the Strathclyde and West Midlands local government funds, originally backed the platform in 2012. 

Five investors allocated capital to Dalmore’s PPP fund.

The PIP has since added a solar fund from Aviva Investors and is seeking authorisation from the UK’s financial regulator to become a standalone investor.

In February, PIP chief executive Mike Weston said he expected the platform to grow and be able to invest in large-scale UK projects – and acknowledged discussions around the TTT had taken place.

The overall vision for the PIP is to hold a mixture of direct and indirect investments, using external partners initially before developing in-house capabilities.

The TTT project will create a new sewer and construct a 25km tunnel underneath London’s River Thames, with completion due by 2023.

The consortium said it would benefit from revenues as soon as construction began next year.

Once operational, the project will be controlled by quasi-government regulator OFWAT.

The group beat 11 other bidders in a tender process managed by Thames Water, the London water provider.

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