Tideway Steps into the Blue

In June 2025, Tideway, the company delivering the Thames Tideway Tunnel, became the first corporate issuer of a public sterling blue bond. Elina Beale, Group Treasurer, Tideway, talks to TMI about the process.

Water is the most precious of commodities and has to be protected. For Tideway, the company set up to build London’s 25km (almost 16 miles) ‘super sewer’, preventing waste discharges from reaching and harming the tidal Thames and North Sea is at the heart of everything it does.

The project – the largest infrastructure development ever undertaken by the UK water industry – is now in its system commissioning phase. This is due for completion later this year when Tideway will officially hand over operations to the city’s largest water utility, Thames Water. Full system acceptance is expected by August 2027.

To support the final stages of work, Tideway recently sought additional liquidity. “We’re getting closer to handover to the tunnel operator [Thames Water] but a little more CapEx is required to take us to that milestone and then the planned system acceptance date,” says Beale.

Tideway chose to raise the money via a £250m eight-year blue bond. This was issued via Bazalgette Finance, its wholly owned subsidiary, and listed on London Stock Exchange’s Main Market and Sustainable Bond Market.

Why so blue?

In 2018, the Republic of Seychelles launched the first-ever blue bond. It raised $15m to help protect local marine areas and improve its governance of priority fisheries. The blue bond market has grown remarkably since then, rising to around $7.2bn by July 2024. It is estimated that the blue bond market will reach $70bn by 2030.

A blue bond is a use-of-proceeds instrument, aimed exclusively at financing marine and ocean-based projects. It is a green bond sub-category, and as such is something Tideway has been engaged with since 2017, having issued 18 green bonds with a total £1.8bn outstanding.

Although Tideway executed a green US private placement in 2023, its most recent green bond issuance was in 2022. While another green bond would have sufficed for the final project stages, it was felt that blue bond issuance aligned even more closely with Tideway’s mission. Indeed, it sits squarely in criterion six  –  Pollution Prevention and Control/ Sustainable Water and Wastewater Management –  of the International Capital Market Association (ICMA) 2023 Practitioner’s Guide, Bonds to Finance the Sustainable Blue Economy.

The already strong appeal of the blue bond for Tideway was elevated by new guidance issued in 2025 by ICMA. It clarified that green bonds that finance 100% of a “blue project” can be labelled as a blue bond by the issuer. However, these must still align with the four core components of its green bond principles: the use of proceeds, the selection of projects and assets, the management of proceeds, and the reporting and external review. The Guide also stipulates that any wastewater management project being executed within 100km of the coast, as indeed Tideway is, can be eligible for consideration under blue bond criteria.

For Tideway, these affirmations were vital in ensuring that it could meet investor criteria. They also enabled the discussion to move forwards in terms of Tideway creating a blue bond governance programme. With three years having passed since its previous (green) bond issuance, and the construction project on the final straight, it was now recognised that the blue bond label would also serve to highlight Tideway’s achievements to date.

Indeed, with the network essentially up and running at this point – by the end of July 2025, for example, it had diverted more than 7.8 million cubic meters of sewage away from the Thames – it was felt that blue bond issuance would act as a timely signal of that progress to the market and beyond. 

“We knew that we needed more money, and it was just the most logical approach to now consider blue bonds,” confirms Beale. “We also knew there would be market interest because even during our previous green issuance, investors were asking whether we were going to start issuing blue bonds.”

Opinions matter

Issuance of a blue bond, as an experienced green bond issuer, has been a fairly straightforward process, comments Beale. The team, advised by Ines Faden da Silva, the former Tideway Group Treasurer and now consultant specialising in infrastructure and sustainable finance, knew exactly what to expect.

However, Beale explains, it was not a matter of simply replicating previous documentation. A number of updates were required because it had been three years since the previous green bond issuance, with certain descriptive elements, for example, having inevitably changed as the project evolved. It was also necessary to incorporate specific blue bond criteria into the issuance documentation, in terms of use of proceeds, for example. Tideway’s sustainable finance framework similarly needed to be revisited in order that the reporting and review structure, and overall strategy, be updated.

With the admin work completed, preparing for the roadshow – the point at which the bond idea is sold to prospective investors – followed. It was essential that the four banking partners selected to run the issuance (Lloyds, RBC, SMBC, and CIBC) were fully aligned on the message, and here Beale’s treasury was closely involved.

“Our banks had to align the message with their sales team on what the blue bond label meant, and prepare them in depth for all the questions that they would face from investors and analysts about Tideway and its aims,” recalls Beale. “And within Tideway too, we had to co-ordinate with our external affairs team, helping them to prepare communications and press releases.”

As part of the issuance process, Tideway obtained an opinion from rating agency S&P, confirming that the updated framework, and the instruments issued via this, would attract the same ‘dark green’ rating, the highest level possible, as its previous issuances. “The ‘shades of green’ methodology is applied to blue bond issuance too, so we needed confirmation that our blue bond could still be included within the sustainable bond market segment of the London Stock Exchange,” explains Beale.

With the sustainability element confirmed, two bond credit ratings were also sought, with Moody’s and Fitch offering Baa1 and BBB+ respectively, matching Tideway’s corporate rating.

Team talk

While treasury naturally engaged with the bond issuance process, with former Group Treasurer Faden da Silva on tap as consultant, other Tideway teams including legal, and external affairs, were also close to the project. “It was great to see the whole executive team getting involved with the investor presentations and investor calls,” comments Beale

Treasury’s role was significant. It undertook the additional work to incorporate the blue bond into the existing framework, in order to obtain the essential second party opinion. It was also charged with aligning the messaging across all the involved banking parties. The level of interest in blue bonds within the UK bond market since the issuance has also pushed Beale’s team into the spotlight, working alongside the external affairs team to field a number of enquiries from other organisations exploring blue bonds.

Post-issuance, the day-to-day work of managing the bond will consist largely of the reporting and review elements which, as Beale says, will carry similar demands as with Tideway’s outstanding green bonds. The process involves updates on allocation of proceeds, and investment impact reporting. Essentially this will demonstrate that the funds are being used for ‘allowable spend’, and that the effect of this spend is meeting the goals set.

Reports will be lodged with an independent technical assessor, which is required to verify and approve the content. In Tideway’s case, Beale notes that impact assessment is “relatively simple” in that it has one project and one asset for which the funds were raised. The information, she adds, is also now comparatively easy to acquire. “We used to produce a standalone sustainability report, capturing all of the work we were carrying out in this space. But as of last year, we now incorporate all of that data into our annual report, and this is verified by our financial auditor.”

In the longer term, Beale explains that Tideway’s KPIs will focus on the number of discharges and the volumes captured, with the performance data being linked directly to its green and blue bonds.

The market responds

While the Tideway blue bond issuance, offered to the market in June 2025, was comfortably oversubscribed, unravelling the motivation of every investor is not possible. While Beale accepts that it is indeed “very difficult to estimate exactly what the contribution of the blue bond label was in terms of investor interest”, she detected a genuine blue rationale among many. “Looking at the list of investors, it’s clear to me that it was an important factor to some of the investors.”

While it may be suggested that a sustainable issuance will likely attract a pricing discount, due to increased demand for sustainable investments, Tideway was not cavalier with its pricing. “When we were looking at blue bond pricing, we naturally looked at how our current green bonds were trading,” notes Beale. “That helped us to arrive at what we consider to be fair value. In our eyes, our blue bond was priced where it should have been.”

While its pricing presents few if any issues, using a blue bond over a green bond has one key advantage, notes Beale. “It offers a little more diversification in terms of the pool of investors that we can potentially reach. Obviously, it appeals to sustainability-focused investors generally, but we also reach those with a specific blue mandate.”

That market is growing, as the figures above reveal. And compared with Tideway’s most recent green bond issue (in 2022), Beale observes a far more determined shift towards sustainability in general. This is evidenced in part by a stronger presence of ESG analysts on the calls, asking questions not only about the blue bond itself but also probing more generally about Tideway’s approach to sustainability.

It’s no wonder then that leading up to the issuance, there was a strong recommendation from Tideway’s banks to have its ESG profile more visible in its presentation and marketing materials. “That advice was clearly driven by a change in investor dynamics, and I definitely noted a shift in attitude this time round,” Beale comments.

Getting in tune

Blue bonds are still a niche, but interest is clearly gaining momentum. “I’m aware of at least two other UK water companies that have already updated their sustainability frameworks to incorporate blue bonds, so definitely there will be more activity in this market,” reveals Beale.

With the markets apparently becoming more accustomed to the aims of sustainable finance, to the point where more discerning questions are being asked, and more attention is being paid to the aims of the issuer, Beale urges other treasurers to be well prepared for their first step into the blue.

For those that already have a green framework, incorporating a blue bond element is actually quite simple, she states. “For the updates, and even the second-party opinion, it was all quite straightforward. But I think once you have an eligible project, you’ll quickly understand the governance and processes around it.”

Now that Tideway has been to market, and had time to assess the outcomes, more blue bonds are on the agenda. “I’d say that all of the green bonds that we have outstanding will likely be refinanced with blue bonds now,” Beale confirms. And with ICMA having produced “some very helpful guidance” on sustainably refinancing long-term projects, she adds that Tideway’s own framework has, in readiness, already been updated to incorporate the refinancing of blue projects.