Anglian Water saw its revenues rise but profits fall during 2014/15, according to its preliminary results for the year ended 31 March 2015 published today.

Revenue for the year was £1,244.3 million, up 2.5 per cent on last year, while operating costs before depreciation and amortisation for the year increased by £38.5 million (7.9 per cent) to £523.9 million (2014: £485.4 million). Underlying operating profit reduced by 3.5 per cent to £452.6 million, reflecting the increase in operating costs and depreciation.

AMP5 gross capital expenditure  in the appointed business for the year was £438.7 million (£217.1 million on capital maintenance, £221.6 million on capital enhancement), compared to £424.3 million in 2014. This includes £57.0 million of AMP6 transition programme expenditure.

Anglian also delivered £9.1 million in cost and efficiency savings derived from a range of initiatives including energy conservation and self-generation, optimising commodities’ sourcing, centralised management of operations, renegotiating supplier contracts on improved terms, and more efficient asset maintenance programmes.

Significant projects delivered during the year include completing the new £45 million Hall water treatment works in Lincolnshire to meet the demands of the growing population in the area, a £7 million scheme to support growth in Cambridgeshire and an £8 million scheme for Bury St Edmunds.

“Very strong performance” on carbon and energy during AMP5

On energy and carbon, the water company has delivered an impressive 54 per cent reduction in embodied carbon in the schemes completed this year compared to its 2010 baseline through a focus on design, materials used and installation and commissioning techniques in construction. Anglian Water said that supply chain commitment to supporting it in this had been key to the delivery of the carbon reduction.  Self-generation from all the company’s renewable sources for 2014/15 was 100 GWh (14.1 per cent of total consumption), compared to 64.1GWh in 2013/14 (8.9 per cent). Self-generation of renewable energy was boosted by two new wind turbines at the Newton Marsh Water Recycling Centre.

Gross operational carbon emissions have decreased by six per cent in comparison to the 2009/10 baseline, with net operational carbon emissions dropping by eight per cent in 2014/15 compared to 2009/10. The firm said it had seen a very strong performance over AMP5, mitigating the forecast 10 per cent increase in carbon emissions from new assets, and delivering a further six per cent reduction in absolute terms against the baseline year. This included an exceptional CHP performance, with output three times higher than at the start of AMP5.

From 2015 onwards Anglian Water’s carbon goals have been updated: to exceed a seven per cent reduction in real terms in gross operational carbon by 2020 from a 2015 baseline; and to deliver a 60 per cent reduction in capital (embodied) carbon by 2020 from a 2010 baseline.

The main influencing factors include a reduction of eight per cent in energy imported from the grid from 2010 to 2015; a reduction of 83 per cent in the amount of natural gas used in in treatment process and combined heat and power between 2010 and 2015; and a three-fold increase between 2010 and 2015 in renewable power generated from biogas.

Anglian said it had continued to ensure all its new and existing assets are as energy efficient as possible. Via its Energy Initiative the firm has partnered with external energy specialists and  delivered energy projects which saved £1.5 million. In total across AMP5 it has delivered around 1,000 energy projects, bringing the cumulative saving to well over £16 million. 

More stretching targets set for AMP6

The utility added that by helping it to challenge traditional construction methods and solutions, alongside enabling the use of innovative techniques, it had also driven the company to set even more stretching targets for the next AMP period.  For example, Anglian is now now targeting 90 per cent of its infrastructure renewals through ‘no dig’ techniques, such as relining or directional drilling, having achieved 80 per cent at the end of AMP5.

Alongside the AMP5 programme, Anglian Water said it has also delivered a £57.0 million AMP6 Transition Programme, commenting:

“This early AMP6 spend has enabled us to mitigate the loss of efficiency resulting from the dip in activity from one AMP period to another, and reduces pressure on our supply chain caused by the stop-start approach experienced in previous AMP transition periods.  By starting design work on our AMP6 schemes early, we enable construction through the summer months and ensure we deliver our early AMP6 outputs both efficiently and in line with our regulatory and customer commitments.” 

Operational performance: Anglian has maintained its leading customer service position

Commenting on its operational performance, the company said it had maintained its leading customer service position, achieving an upper quartile position based on the customer service survey methodology used by Ofwat in AMP5.

Despite a far higher number of consents being introduced, the firm’s water recycling teams had delivered outstanding compliance results at treatment works, with the lowest number of non-compliant works since 2007. Anglian also achieved a 3* rating in the Environment Agency’s annual assessment, and been assessed as stable in both the wastewater infrastructure and non-infrastructure serviceability measures.

On metering, more than 16,000 customers chose to have a meter fitted in in 2014/15, with Anglian also fitting another 5,500 under its enhanced metering programme and replaced 121,000 meters. Anglian Water has the highest level of metered customers among the major water and sewerage companies in the UK, with almost 80 per cent paying a metered bill  -  88 per cent of customers now have a meter fitted, and 78 per cent are now billed according to the consumption recorded by the meter.

The utility now plans to increase this number even further in AMP6, with plans to install a further 86,000 meters by 2020 and is also forecasting that another 74,000 customers will choose to have a meter fitted during the period.

Metaldehyde an ongoing focus

Anglian Water remains focused on minimising the impact of metaldehyde – the most common pesticide for the control of slugs – on its operations. Between October and December, high levels of metaldehyde in the region’s rivers forced it to stop abstracting water at ten locations to prevent it reaching treatment works.

The water company said that while the tactic had successfully protected water quality, it was not sustainable because it then had to abstract during wetter months to maintain reservoir levels and reliable supplies of drinking water. During AMP5 the company modelled those areas where metaldehyde use is most likely to affect water quality in its reservoirs and its new team of Catchment Advisors appointed during 2014/15 will now work with farmers and agronomists in these areas to deliver its Catchment Management Strategy.

Roll out of new telemetry system

The upgrade and replacement of Anglian Water’s telemetry network has continued during 2014/15, described as “a hugely complex and sensitive task”.

The water company has been gradually swapping its standalone telemetry system for one much more closely integrated with other business systems. After five years’ work, the first parts of the old system were switched to the new, bespoke platform in November. The transfer has continued in stages, with around 58 per cent now complete. Eventually the new system will comprise of more than half a million monitoring points and 35,000 telemetry pictures. Anglian said the benefits of the new system are already being seen, with more effective, risk-based, intelligent alarms and new performance reports.

Flooding remains one the most significant challenges for the network

Anglian Water also highlighted the fact that flooding remains one of the most significant challenges that its network and customers face. The firm is now working with the Environment Agency and the 21 Lead Local Flood Authorities (LLFAs) in the region to identify planned flood prevention projects with benefits for customers. Anglian has agreed to provide £8.4 million of partnership funding for projects across the region during AMP6.

The firm added that it continues to lead the industry on the adoption of sustainable drainage systems (SuDS) on new developments,  this year completing its first two SuDS retrofit schemes to help reduce the risk of flooding to a number of customers in Norfolk and Suffolk.

New AMP6 alliances to help deliver services for next 15 years

Anglian Water has have now appointed its AMP6 partners, grouped into four new alliances, to help deliver services for the next 15 years, describing the alliances as “different from those elsewhere in the industry, with an unparalleled degree of integration and alignment and the opportunity for longer term collaboration.”

The four new alliances for AMP6 and beyond are:

Integrated Main Works Capital (IMWC)

The largest of the new alliances, IMWC includes Balfour Beatty, Barhale, Grontmij, MWH, Mott MacDonald and Skanska, alongside Anglian Water, maintaining the @one Alliance name. In place since last May, it combines the work of Special Projects and the @one Alliance to cover all types of complex construction and refurbishment projects.

Integrated Operational Solutions (IOS)

Includes Morrison Utility Services, Barhale and Kier, and covers local refurbishment and maintenance across both Water and Water Recycling.

Integrated Metering and Developer Services (IMDS)

Includes Kier and Clancy Docwra, covering industrial and domestic metering, new housing and estate infrastructure and water efficiency audits.

Integrated Maintenance and Repair (IMR)

Covers network infrastructure maintenance for both water – with partners Kier and Clancy Docwra, and water recycling – with Claret Civil Engineering, Danaher & Walsh, Clancy Docwra and Public Sewer Services.

Commenting on the company’s financial results and operational performance for the year, Peter Simpson, Anglian Water Group’s Chief Executive, said:

“Customers remain at the heart of our operation. Our customer service is recognised as industry leading, providing evidence that the initiatives we have developed and implemented are working. These projects put service at the heart of our proposition, keep customers informed, and improve the level and quality of support that we offer.“

“More than 50,000 customers had a direct influence in the development of our Business Plan for the next five years, AMP6. The plan, which we agreed with Ofwat in January 2015, promises a seven per cent price drop for an average household bill in 2015/16. This is the largest percentage reduction of any of the water and sewerage companies, and is something we are able to commit to as we have become an increasingly efficient business during AMP5 between 2010 and 2015.”

“Our plan for AMP6 continues to put customer priorities first. It details our plans to take our leakage level lower than ever before, to fit more meters and to help customers who struggle to pay, all while protecting our assets and the communities we serve from drought and flooding. These are the things that customers told us matter to them most.”

 “We’ve created four Alliances that are unique to our industry to deliver our capital programme for AMP6. We’ve appointed all of the business partners that will deliver our capital and maintenance programmes for a period of up to 15 years. This will help us deliver the outcomes we agreed with our customers during our PR14 planning process.”