11/06/2009

Record investment as Welsh Water helps customers cope with recession

Despite the increasingly difficult economic environment, Welsh Water, the not-for-profit company owned by Glas Cymru, reported a year of continued good progress in operational and environmental performance and in customer service, raising its ‘customer dividend’ to £21 per customer.

Glas Cymru is unique amongst UK utility companies in that it has no shareholders and all its financial surpluses are used for the benefit of Welsh Water’s customers. Since 2001, it has returned some £150 million through its annual ‘customer dividend’ – it is the only water company to give a ‘customer dividend’ in this way.

Welsh Water also reported a strong financial position, its biggest ever capital investment programme and increased help for customers.

Glas Cymru Chairman Lord Burns said, “Welsh Water has responded positively to the challenges of the current economic recession. We have put affordability at the heart of all our plans and have introduced a range of innovative measures designed to help many of those customers who are struggling to pay their bills.”

“Having built up a strong financial position over the last seven years, we have been able to afford to press ahead with our largest ever capital investment programme, with over £355 million spent on projects during 2008-09 – an 18% increase on the previous year. Our robust financial position means that all our customers will continue to see the benefits of our unique business model in the years ahead,” he added.

Highlights for the year include:

• ‘Customer dividend’ in 2008-09 of £21 per customer totalling £27 million (2007-08: £20 per customer, totalling £26 million). The ‘customer dividend’ has increased steadily since it was first introduced in 2003 at £9 per customer.
• Welsh Water Assist tariff introduced on a trial basis which, combined with the existing Water Direct and Water Collect tariffs and the Welsh Water Customer Assistance Fund, offers a range of support for many customers struggling to pay their water bills.
• Capital investment of £355 million (2007-08: £301 million) – a record level which will benefit customer service, environmental performance and drinking water quality.
• Significant improvement in important aspects of environmental performance in 2008, including 100% compliance at wastewater treatment works (2007: 99.1%).
• Robust financial position, with gearing at 72% (2008: 72%) - as against 93% when Welsh Water was acquired by Glas Cymru in May 2001.

During the year, Welsh Water had to cope with some unusual operating challenges, including new threats to drinking water quality in North Wales, which required two precautionary boil water notices, and the impact of the very cold spell last winter, during which we needed to fix some 100 bursts and leaks a day.

Welsh Water has also published its plans for the period 2010 to 2015, in which it proposes to maintain a high level of capital expenditure, including important investments to enhance the protection of drinking water quality, mitigate the worst impacts of sewer flooding, substantially reduce the carbon footprint of its activities and improve customer service. All this is to be achieved with the average household customer’s bill in 2015 being the same in real terms as it is today. According to Ofwat research, over 90% of Welsh Water’s customers endorsed its draft business plan which was released last summer.

The results in detail:

Financial results:

• Having given a ‘customer dividend’ of £27 million, the loss before taxation (excluding the fair value movements on financial instruments) was £11 million (2007-08: profit of £11 million, having given a ‘customer dividend’ of £26 million).
• The impact of reduced consumption amounted to £3 million during the year, with demand from our business customers down some 3%.
• Operational costs of £267 million (2007-08: £234 million), an underlying increase in real terms of some £25 million, mainly due to increased power costs of £13 million and an increase of £6 million in the provision for bad debts.
• Net debt of 72% of Regulatory Capital Value (RCV) (2008: 72%).
• A robust liquidity position, with £559 million of cash and undrawn bank loans as at 31 March 2009, meaning that the business is well funded to 2010 and beyond.
• Strong credit ratings, with the senior bonds being rated ‘A’ by Standard and Poor’s and Fitch Ratings, and ‘A3’ by Moody’s.

Operational performance

• Continued high level of water quality compliance - 99.95% mean zonal compliance (2007: 99.93%).
• 100% compliance at wastewater treatment works (2007: 99.1%).
• Category 1 and 2 pollution incidents reduced to 3 (2007: 9 incidents).
• In the 2009 summer season, Wales has 43 Blue Flag beaches and marinas (2008: 47 Blue Flags), over a third of the UK total.
• Achieved the leakage target set by Ofwat for 2008-09, despite the effects of the very cold weather this winter, when some 100 leaks and bursts were repaired every day.
• Continuing high customer satisfaction, as measured by independent tracking research.

Major capital investment programme:

• Capital investment of £355 million (2007-08: £301 million) benefiting customer service, environmental quality and drinking water quality.
• Total capital investment since April 2005 of £1,162 million (equivalent to some £1,000 of investment for every household served).
• Good progress in delivering our enhanced drinking water quality protection programme, with ultraviolet disinfection operational at 12 sites and additional stages of treatment being built at 9 sites, predominantly in north Wales.

Click here for the full Preliminary results.

Notes for Editors:

• Glas Cymru was formed in April 2000 for the sole purpose of acquiring Welsh Water. It is a ‘company limited by guarantee’ registered under the Companies Act 1985. Glas Cymru has no shareholders. Instead, Members carry out an important corporate governance role but they do not receive dividends nor do they have any other financial interest in the Company. This corporate structure ensures that all financial surpluses generated are retained and reinvested for the benefit of Welsh Water and its customers.
• Glas Cymru’s constitution strictly limits its purpose to that of financing water assets in Welsh Water’s area of appointment and managing Welsh Water’s business so that high quality water and sewerage services are delivered at least cost to the communities served by Welsh Water. Glas Cymru cannot diversify into other unrelated commercial activities.
• Welsh Water outsources the provision of operational and customer services and the delivery of its investment programme. By working closely in a partnership framework with industry specialists, we aim to deliver improving business performance and customer benefits.
• Welsh Water has recently introduced new customer tariffs, unique in the UK water industry, which provide assistance to some customers who experience difficulty in paying their water charges. These include capped charges for a specific group of customers with low income and high water use, and a range of collection methods that include a discount for direct payment from benefits.
• Consistent, independent research of customer opinion carried out by Beaufort Research shows that customer satisfaction with the service provided by Welsh Water remains stable at very high levels – with nearly 80% of customers being either ‘fairly satisfied’ or ‘very satisfied’. Customers rate the value for money provided by Welsh Water as being above that provided by other utility companies in Wales covered by the survey.

Ends