Northern Ireland has closed Project Omega, the second time the Province has brought in the private sector to provide both water supply and wastewater treatment services - closing the circle from Alpha to Omega

Northern Ireland Water Services closed the financing of Project Alpha back in June 2006. This project comprises the provision of new and upgraded bulk treated water supply schemes at five major treatment centres to provide enhanced treatment to 50 per cent of the demand.

The second project - Omega - closed earlier this month. It was set up to build four major wastewater treatment facilities and two sludge recycling facilities to provide enhanced levels of treatment to meet stringent EU directive requirements.

Both projects are based on build operate transfer (BOT) models, with the appointed consortia financing and operating the facilities over a 25 year period.

Project Alpha was the first major public water supply BOT within the UK and there was a great deal of political will for it to progress. The same can be said of Omega, though it took a long time to reach financial close.

Project Omega will upgrade wastewater treatment facilities responsible for around 20 per cent of Northern Ireland's wastewater treatment capacity and 100 per cent of sludge disposal. The authorities claim it represents savings of more than 17 per cent from Water Service's initial estimates.

David Cairns, regional development minister, said of Project Omega: 'This contract will allow much-needed wastewater projects to proceed at an accelerated rate.

'Water Service discharge standards have improved significantly over the past five years but there is still some way to go before Northern Ireland achieves the 95 per cent compliance reached in England and Wales.'

Cairns added: 'The people expect to have modern infrastructure to support increased growth and industrial development, while protecting public health, ensuring cleaner beaches and safeguarding our environment.

'The introduction of water and sewerage charges will allow us to finance the continued, sustained investment required to reach the European compliance levels achieved in the rest of the UK.'

Water Service chief executive Katharine Bryan said: 'The partnership with Glen Water is an important part of the Water Service's capital investment programme which has been designed to accelerate the Water Service's programme of European compliance to increase capacity within the timeframe needed, while ensuring value for money.'

The existing wastewater treatment facilities included in the Omega PPP Project are located at:

• Ballynacor
• Bullay's Hill
• Seagoe
• Armagh
• Richhill
• Ballyrickard

Construction of the new North Down / Ards wastewater treatment facility - to be one of the most modern and advanced facilities in the country - is already underway through an advance works contract.

Construction of a second incinerator at Duncrue Street in Belfast for the safe treatment and disposal of sewage sludge is scheduled to begin shortly.

Water Service's PPP Programme is co-sponsored by the Strategic Investment Board (SIB).

David Gavaghan, SIB chief exec, said: 'The Omega Project demonstrates a new confidence in Northern Ireland's ability to deliver large and complex infrastructure projects.

'This extensive procurement attracted high quality interest from leading specialists in the national and international utility sector, as well as providing new opportunities for indigenous companies in Northern Ireland.'

Project winner - Glen Water

The £161 million Project Omega was won by Glen Water, a 50:50 joint venture between Thames Water and Laing O'Rourke - a relationship that dates back to the 1920s when they first worked together in their previous incarnations, OC Summers and the Metropolitan Water Board.

Other member of the construction team are:

• Dawson WAM 
• BSG Civil Engineering
• Williams Industrial Services
• Hyder Consulting (UK)

Mott MacDonald is acting as the client's technical advisor in association with PwC (providing financial advisory services) and legal advisor Dundas & Wilson. MottMac advised on the issues surrounding the conjunctive operation of these new facilities within the overall water supply system in Northern Ireland.

Financing

The PPP scheme is to upgrade renovate and maintain existing wastewater treatment and sludge disposal sites as well as associated infrastructure across Northern Ireland has a capital cost of £122m and a full funding requirement of £160.6m.

The funding breakdown of senior debt and equity with sub debt includes:

• a term loan - £136.5m
• standby facility - £9.3m
• equity bridge (equity plus subordinate debt) - £14.8m

Considering a combination of the term loan and the standby represents senior debt with the remaining £14.8 of the full funding requirement representing equity, the project has a 91: 9 debt:equity ratio.

Depfa Bank and Bank of Ireland (BoI) were 50:50 joint MLAs on the deal providing the term loan and standby facility. The equity bridge was underwritten fully by Depfa.

The debt facilities were priced at LIBOR+100bp.

The Water Service's PPP programme is co-sponsored by the SIB - an agency of the Office of the First Minister & the Deputy First Minister, which was established as a company under the Reinvestment and Reform Initiative in 2003.

The SIB has three main roles:

• to help deliver key investment programmes and projects
• support reform of public services
• build a 10 year investment strategy for Northern Ireland

The Northern Ireland Water Service was advised by a consortium led by PwC and included Mott MacDonald and Dundas & Wilson.

The sponsor had McGrigors as legal and RBS as financial adviser, Hyder Consulting (UK) as technical adviser.

The banks took technical advice from the Carl Bro Group.

Conclusion

As the second wastewater project to close in Northern Ireland, the province is well on its way to meeting EU standards and regulations on wastewater treatment and sludge disposal.

Omega was a long time in the closing, but construction started early as the parties were confident of a positive result.

While Water Service discharge standards have improved in recent years, there is still a long way to go before Northern Ireland achieves the 95 per cent compliance reached in England and Wales.

However, the back has been broken by Alpha and Omega.

The project at a glance