In the run-up to Ofwat’s Final Determinations for the water companies’ AMP7 business plans on 16^th December, Anglian Water’s Chief Executive Peter Simpson has once again warned that its plan is “not financeable” based on Ofwat’s Draft Determination.

Commenting on Anglian Water’s results for the half year to 30 September 2019, the water company chief said:

“We passionately believe that our plan is the right one to safeguard the future of our region and enable it to flourish. However, it is not financeable based on Ofwat’s Draft Determination, as we stated in our formal response in August.”

Peter Simpson said since then the company had striven to find further cost efficiencies, made changes to its total expenditure (totex) plan and accepted Ofwat’s proposal to test its new funding model, Direct Procurement for Customers, to finance a vital new treatment works at Elsham in the north of the region. The changes will see bills reduce by around 1.1 per cent over five years.

He added:

“We continue to work with Ofwat in the run up to Final Determination, to be issued later this month, and hope to reach an outcome which will meet the needs of our customers and the environment.”

Anglian Water is “performing strongly against a challenging backdrop”, according to its half-yearly report for the six months ended 30 September 2019.

“Performing strongly against a challenging backdrop”

Group revenue rose to £717.0 million during the period, an increase of £22.4 million (3.2 per cent) on 2018, attributable to regulatory price increases, customer growth and increased housing development activity, partially offset by lower demand compared with the hot, dry summer in 2018.

Underlying profit before tax for the period of £54.7 million, was down £7.2 million compared to gains of £56.3 million in 2018 – the profit excludes fair value losses on derivatives of £171.3 million.

Anglian Water said these are volatile non-cash annual movements which distort actual economic performance and should therefore be excluded when assessing underlying profit.

Including the fair value movements, results in a loss before tax for the period of £116.6 million, down £234.8 million from a profit of £118.2 million.

Cash generated from operations of £366.2 million, was up 1.5 per cent on last year and consistent with higher revenues. However, this was partially offset by increased operating costs which rose by 5.3 per cent – an increase of £16.1 million. Anglian said the increase reflected reinvestment in proactive leakage maintenance, increases in below-ground infrastructure repairs and inflationary pressure on costs, partially mitigated by savings from efficiency initiatives.

Dividend payments paid in June of £67.8 million are marginally down on £68.0 million paid in 2018. in line with the Board’s commitment to reduce gearing, no further dividends are planned for the rest of the year .

Key operational highlights included:

• Ambitious programme underway to install solar power at more than 100 further Anglian Water sites
• One of only two companies to gain approval in the Drinking Water Inspectorate’s new Risk Management Approval Scheme to meet exacting new water industry standards.
• Preferred bidders identified for £500 million Strategic Pipeline Alliance which will see around 500km of large pipeline inter-connectors installed as part of the utility’s commitment to support making the East of England resilient to the risks of drought. The new system will facilitate the movement of water more easily across the Anglian Water region and will be supported by a digital twin (a digital replica of the network which helps us test, plan, anticipate and resolve issues in the virtual world).
• Developing proposals to support the economic growth of Cambridge by relocating the Cambridge Waste Water Treatment Plant, paving the way for the construction of 5,600 new homes.
• Additional support to be offered to an average of 475,000 vulnerable customers each year from 2020-2025.
• Signed up to an ambitious £120 million multi-sector partnership which will see waste heat from Anglian Water treatment facilities used to heat two of the UK’s largest greenhouses, being built in Suffolk and Norfolk, with the added benefit that water returned to the environment is cooled, removing excess heat from the river systems.
• Committed with other water companies to plant 11 million trees by 2030; Anglian Water’s contribution will include at least 30 new treatment wetlands developed over the next five years.
• Renewable energy generation from combined heat and power (CHP) plants on track to reach 120 GWh in 2019/20, enough to power 50,000 homes for 100 days.
• Adapting infrastructure to protect valuable chalk streams, including moving the abstraction point for Heigham Water Treatment Works in Norwich away from the upstream stretch of river, to the works itself.
• Leading Coalition partnerships forged with Spanish water company Global Omnium and Dutch water company Vitens to share expertise and drive international collaboration.
• Saving money and cutting carbon: newly developed mobile sludge thickeners enabling saving of £1 million a year and cutting CO2 emissions.
• Cutting-edge project underway using advanced transient pressure logging and online bacteria monitoring to ensure high standards of water quality at key storage locations in the network.

Commenting on the results, Peter Simpson said:

“As we enter the final six months of our current five-year business plan we continue to provide best-in-class customer service to our seven million customers, leading the industry on reducing leakage, creating and maintaining a resilient network, and safeguarding our environment for future generations, while delivering strong financial performance. “

Ofwat’s 2018/19 Service Delivery Report, published in October, ranked Anglian as the top-performing water company in England and Wales for its record across a wide range of performance measures. The utility scored in the top 25% for seven of the 10 measures (wholesale, customer service, meeting performance commitments, earning financial incentives, leakage, water quality contacts and internal sewer flooding) and in the top 50% for the remaining three (retail, supply interruptions and pollution incidents).

Anglian Water also ranked as the top water and waste water company for the final year of Ofwat’s Service Incentive Mechanism measure of customer service and number one across the whole AMP6 business plan cycle.

In July Anglian became the first UK water company to change its Articles of Association to make a legal commitment to consider the impact of every decision it takes on both community and the environment, as well as ensuring fair returns for its shareholders.