State-owned Chinese firm chosen to build UK’s Swansea tidal lagoon

China Harbour Engineering Company (CHEC) has been named preferred bidder for the $460m (£300m) contract to build the dam for the world’s first tidal lagoon power plant, in Swansea, Wales.

According to the terms of the deal approximately half of the contract value must be spent on British workers and suppliers, leaving the other half open to Chinese firms and workers.

CHEC has proposed investing in the tidal scheme as well. On the back of the project, costed in total at around £1bn, CHEC says it will invest more in UK infrastructure projects and set up a UK subsidiary.

In return, CHEC and the scheme’s developer, Tidal Lagoon Power (TLP), will sign a memorandum of understanding for the joint development of tidal lagoon power projects in Asia, particularly at sites along China’s 18,000km of coastline.

This is the first European project for CHEC, a subsidiary of state-owned China Communication Construction Company. CHEC says it has over 10,000 employees working in 80 countries and is currently working on contracts with a total value of more than $10bn.

The tidal lagoon award is the second major project win for a Chinese company in the UK. In 2013 Beijing Construction Engineering Group was appointed to help build the £800m Manchester Airport City scheme, with UK firm Carillion, following Chinese investment in the property development.

Chinese investment in UK infrastructure is set to rise: two state-owned nuclear firms, CGN and CNNC, are taking a stake of between 30% and 40% in the UK’s new nuclear power plant at Hinckley Point.

Grow our UK presence

In Swansea CHEC will build the six-mile lagoon wall in Swansea Bay.

Lin Yi Chong, President & CEO at CHEC said: "CHEC has taken the strategic decision to enter the UK infrastructure investment and construction market, and we see the Swansea Bay Tidal Lagoon, a pioneering scheme that could bring the world a new energy option, as the cornerstone project in our business development strategy in the UK and wider Europe.

CHEC has taken the strategic decision to enter the UK infrastructure investment and construction market, and we see the Swansea Bay Tidal Lagoon as the cornerstone project in our business development strategy in the UK and wider Europe.– Lin Yi Chong, President & CEO, CHEC

"We have not invested directly into the Swansea Bay project but we made a proposal to do so and will seek opportunities to invest in similar projects in the UK and Europe. We will seek to grow our UK presence through significant investment into a subsidiary business and through a programme of UK infrastructure investment and construction."

Richard Graham, Member of Parliament for Gloucester and chair of the All-Party Parliamentary China Group, said the deal "reinforces Britain’s position as Europe’s leading beneficiary of Chinese inward investment. The opportunity for later exporting British tidal expertise to Asia with CHEC is considerable and highlights the benefits of positive business engagement with China."

Mark Shorrock, chief executive of TLP, said: "I have worked in China, speak Chinese and have huge esteem for China’s delivery capability and ability to deliver projects to time and budget. Having encouraged CHEC to bid this job and invest in Western European infrastructure projects by creating a British base, I was delighted, following an intensive competition, when my engineering colleagues recommended CHEC for our seminal Swansea Bay project."

Building the bund wall

The 320MW installed capacity scheme in Swansea has a design life of 120 years and a net annual power output of over 500Gwh – enough to meet the annual electricity requirement of over 155,000 homes, or over 90% of homes in the Swansea Bay area.

Under the terms of the contract, CHEC will be responsible for the construction of the bund wall and coffer dam, sourcing and transporting rock armour and materials to Swansea Bay, and managing all landside and marine crews associated with this element of the build. At peak construction, it will manage 500 workers on site at Swansea Bay.

In December 2014, the project was named in HM Treasury’s National Infrastructure Plan, the Welsh Government’s Wales National Infrastructure Plan, and European Commission president Jean-Claude Juncker’s investment plan.

Following advanced works, a fixed-price contract with a risk and value engineering scheme for the main marine work at Swansea Bay will be signed later this year. Approximately half of the contract value will be spent on a British workforce, local partners and a local supply chain.

Tidal Lagoon Swansea Bay Plc – a special-purpose vehicle company established to build, own and operate the lagoon power plant – will through the summer run further tenders for the construction of a turbine assembly plant in Wales, and for the lagoon’s public realm and buildings work.

The project’s major delivery partnerships announced to date are: Atkins as client’s engineer; General Electric and Andritz Hydro as turbine preferred bidders; Laing O’Rourke as turbine housing preferred bidder; Alun Griffiths as public realm ancillary works preferred bidder; China Harbour Engineering Company as marine works preferred bidder; and Prudential and InfraRed Capital Partners as equity partners.

The secretary of state for energy & climate change will determine the project’s application for a Development Consent Order by 10 June 2015.

Tidal Lagoon Power is developing proposals for a fleet of six tidal lagoons to meet up to 8% of UK electricity demand.

CHEC has selected Newport’s environmental consultancy JBA and Surrey engineering consultancy Cullen Grummitt & Roe to provide support through the advanced works and value engineering phase for the Swansea Bay Tidal Lagoon project. 

CHEC has also appointed H R Wallingford to undertake 2D and 3D hydraulic models and will select more UK consultants and local resources to provide technical supports to the design and construction phases in due course, TLP said.

Image: The UK’s first tidal power project will involve a six-mile lagoon wall in Swansea Bay (Tidal Power Lagoon)

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