Anglian Water has today submitted its AMP8 business plan to Ofwat setting out how it will invest more than £9 billion between 2025-30 to deliver essential investment in the East of England.

The scale of enhancement is double that of Anglian’s AMP7 enhancement investments. The plan will see the water company double its investment in the environment to £4 billion to enable nature recovery. Highlights include:

Using nature-based solutions to create an area the size of 100 football pitches of treatment wetlands along with 52 new sustainable urban drainage schemes

• Invest £476 million to accommodate housing growth, with 700,000 more people expected to live in the region in the next 20 years
• Reduce per capita consumption to 124 litres per person per day
• Plan for 2 new reservoirs which will supply 625,000 properties across the region
• Strategic Pipeline network extended to build further drought resilience and environmental protection
• Increase capacity of the waste water network by 112 Olympic sized swimming pools, reducing pollution risk and spills
• Achieve a 70% reduction in capital carbon against its 2010 baseline
• Renew 695km of vulnerable pipes to futureproof water mains and sewers against climate impacts

Spending plans include:

• Water quality £210 million
• Resilience £308 million
• Interconnectors £534 million
• Supply side improvements £256 million
• Strategic regional options £233 million
• Metering £137 million
• Leakage £35 million
• Demand side improvements £22 million
• Reducing flooding risk £61 million
• Storm overflows and FFT £517 million
• Growth at WRC £164 million
• First time sewerage £59 million
• Bathing waters £38 million
• Nutrient Neutrality £138 million
• Advanced WINEP £26 million
• Chemicals removal and investigations £63 million
• Monitoring £264 million
• Water WINEP £51 million
• Investigations £24 million
• Nutrient and sanitary parameters £638 million

Anglian Water "we will need to invest significantly more" because of the challenging nature of the region

Commenting on the investment needed to maintain the level of service, Anglian Water said it will need to invest significantly more into its operations because of the challenging nature of its region, which is “only going to become more difficult as the climate becomes ever more volatile.”

Despite having increased its focus on efficiency across both base and enhancement investment, Anglian Water says it is still left with a significant OPEX challenge in AMP8 driven by environmental obligations, commenting:

“The high level of environmental ambition we are striving for comes at a cost. As an example, we will face a large increase in pumping costs associated with our strategic pipeline and greater chemical and sludge handling costs from our considerably larger phosphate removal programme. We are exploring ways to reduce these costs.”

The overall level of enhancement expenditure in AMP8 is almost entirely driven by statutory programmes which are twice the size in comparison to AMP7. Anglian Water is flagging up the fact that the sheer scale and ambition of our investment programme “inherently creates a delivery challenge.”

Water company intends to increase supply chain resilience

AMP8 enhancement costs have doubled, the company added, and as large-scale asset investment ramps up across both the water sector (and across UK plc as a whole), additional pressure on shared supply chains will continue. The company has strengthened its relationship-based approach with alliances through early and ongoing engagement with alliance partners and supply chain companies.

It is looking to bring a partner ‘off the bench’ to enhance capacity and capabilities in new areas such as nature-based solutions by April 2024.

It also intends to increase supply chain resilience by providing early visibility of the programme to suppliers, to align capabilities, resources, and plans. Anglian Water said it will continue to monitor vulnerabilities in the supply chain, develop contingency plans and address potential disruptions or delays in the supply chain. It also plans to set up new agreements, partnerships and alliances by assessing internal capacity, and working with external delivery partners to provide expertise, resources, and experience.

"Significant concerns that Ofwat’s 'early view' is unlikely to be sufficient to attract the necessary equity"

However, Anglian is expressing concerns about the financeability of AMP8 plan for notional capital structure which is dependent on attracting sufficient equity investment at the cost set out in Ofwat’s ‘early view’ on the allowed return on capital.

The business plan states:

“Notwithstanding our shareholders long-term commitment, we retain significant concerns that Ofwat’s 'early view' is unlikely to be sufficient to attract the necessary equity, without which the notional company would not be financeable and is not financially resilient to shocks. To enable companies to attract equity investment, we recommend a range of methodological changes to the cost of capital estimation….

“There is uncertainty over the terms on which Anglian Water, as well as other regulated companies, will be able to access capital in AMP8. Specifically, when the allowed cost of equity and the allowed cost of new debt are compared, the spread between them creates an incentive for an investor to provide equity capital at greater risk.

“That spread has significantly fallen over the previous 20 years, reducing the incentive for equity investors to invest.”

The water company also said that although the increased investment is crucial and “largely supported by customers and stakeholders alike, we recognise raising bills in the current economic conditions will be difficult.”

During AMP8 the average household bill will rise by 15.5% In 2024/25 the average bill will be £498.80, gradually rising year on year to reach £571.30 in 2029/30.