United Utilities is continuing with its acceleration of capital investment in AMP6, with a total of £383 million invested in the first half and around £800 million planned for the full year, according to its half year results for the six months ended 30 September 2016 published today.
With operating profit of £303.6 million slightly ahead of last year’s £278.3 million, the water company is paying its shareholders an interim dividend of 12.95 pence per share, an increase of 1.1% in line with policy.
In addition to its c£3.5 billion five-year regulatory capex programme for AMP6, the firm plans to invest over £100 million in non-regulated projects across 2015-20, subject to acceptable returns, principally relating to solar power - United Utilities has now invested a total of £37 million during the last 18 months.
United Utilities said innovation and new technology through Systems Thinking approach are driving further operational improvements across the company. The utility is being more proactive in the management of its assets and networks and driving innovation through integrating the use of its assets, leveraging data intelligence and employing new technology and work processes.
It now aims to improve its predictive modelling through better use of sensors in the network and better analysis of other data, such as weather forecasting, to enable it to address more asset and network problems before they affect customers, thereby reducing the level of reactive work and improving performance and efficiency.
A new telemetry backbone has been successfully installed across the United Utilities’ region, providing the data highway between its sites and integrated control centre, enabling enhanced monitoring and intervention.
Full regional production planning is now up and running for both water production and sludge processing, supported by more enhanced decision-making systems capability at site level.
Offsite manufacture targetted for 75% of AMP6 projects
United Utilities piloted design for manufacture and assembly (DfMA) in AMP5, the prefabrication of a significant proportion of projects off-site and is targeting over 75% of projects in AMP6 to employ this approach. The water company said DfMA also supports product standardisation – it is increasingly using common designs across the supply base, saving duplicated design costs and offering production and maintenance efficiencies.
Following successful trials,United Utilities is using a new process technology innovation, Nereda, that offers significant efficiency and cost saving benefits in wastewater treatment. Not only does it reduce the time wastewater has to sit in the tank as it goes through the activated sludge process, it also requires less oxygen which reduces power consumption.
The water company recently contracted for its first Nereda plant in Kendal, the first in the UK of significant size. United Utilities is targeting up to a 20% through life cost reduction by using this technology and other site applications are set to follow.
Retail competition - "well-placed to compete"
Commenting on its Water Plus JV with Severn Trent, United Utilities said the JV gave it ”first mover advantage” ahead of full retail market opening in April 2017, with operations up and running and “well placed to compete.” The utility has attributed a small fall in revenue – down £4 million - as reflecting the accounting impact of Water Plus JV.
Commenting on the results, Steve Mogford, Chief Executive Officer, said:
“This has been a strong first half performance in which we made significant progress towards meeting our customer, environmental and financial targets.
“Customer service has again improved, resulting in our best score under Ofwat’s revised service incentive mechanism. We’re continuing to enhance our customer service offering and recently launched Priority Services, to provide dedicated support for those who are experiencing short or long-term personal or financial challenges.”
“The acceleration of our capital investment programme continues to deliver early customer service and operational benefits. We have invested £383 million in the first half of this year and remain on track to invest around £800 million for the full year. Our Systems Thinking approach to running the business continues to drive innovation into our operations and we are rolling out further capability this year, including new process technology.
“Our environmental performance has remained consistently high and we were delighted to attain industry leading company status from the Environment Agency.
“Overall, we are encouraged by our progress in the early part of this regulatory period. We have a robust financial position and are confident that we can deliver our targets for both customers and shareholders.”
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