10/06/2010

Record investment of £1m a day benefits Welsh Water’s customers

Welsh Water invested a record £1 million a day last year to deliver major improvements in drinking water safety, environmental quality, customer service and energy efficiency, boosting the Welsh economy in the middle of the recession.

Welsh Water’s annual results, announced today, record that the £361 million capital programme was successfully completed, bringing investment over the past five years to more than £1.5 billion, equivalent to more than £1,000 for every household in its area.

Welsh Water, the ‘not-for-profit’ company owned by Glas Cymru, reports another year of good overall operational and environmental performance. It was able to pay a ‘customer dividend’ of £22 per customer, bringing the total paid to customers in the last seven years to over £150 million.

Glas Cymru is unique amongst UK utility companies in that it has no shareholders. It reinvests all its financial surpluses for the benefit of Welsh Water’s customers.

Glas Cymru Chairman, Lord Burns said, “The prudent financial policies that we have pursued since 2001 mean that we have been able to deliver our largest ever capital investment programme. This investment has been highly beneficial to the economy in Wales during the recent recession and will allow us to protect drinking water safety for many years to come, as well as to start to respond to the long term challenges of climate change.”

Welsh Water’s solid overall performance puts the company in a strong position to meet the significant challenges it will face over the next five years. Following the result of Ofwat’s Price Review in November 2009, the business plans to reduce its day to day running costs by some 20%, whilst delivering further improvements to operational and environmental performance. Customers will benefit greatly from Welsh Water’s ambitious plans, through improved quality of service and better value for money, with average household bills being £30 a year lower (before inflation) by 2015.

As previously announced on 8 March 2010, Bob Ayling will become Chairman of Glas Cymru when Lord Burns stands down at the end of the 2010 annual general meeting. Glas Cymru announced today that Dame Deirdre Hine will also stand down as a Non-Executive Director at that time having made a huge contribution to the company during her nine years on the Board.

Highlights for the year:

• Welsh Water’s unique range of customer assistance tariffs and its Customer Assistance Fund have this year helped some 27,000 customers who were facing financial hardship as they pay their water bills.
• A ‘customer dividend’ of £22 per customer, costing £28 million (2009: £21 per customer, costing £27 million), bringing the total returned to customers between 2003 and 2010 to more than £150 million.
• Continued high levels of customer satisfaction, with 83% of customers expressing satisfaction in independent tracking research.
• Capital investment of £361 million (2009: £355 million), a record level which will benefit customer service, environmental performance, drinking water quality and energy efficiency.
• Sustained good overall service performance.
• A robust financial position, with gearing at 71% (2009: 72%) – compared with 93% when Welsh Water was acquired by Glas Cymru in May 2001.

Financial results:

• Profit before taxation (excluding exceptional costs and the fair value movements on financial instruments) was £107 million, compared with a loss of £11 million in the prior year. This change primarily reflects the recent unprecedented falls in interest rates and the impact of RPI deflation on index-linked debt, rather than any material change in the underlying operational cash-flows of the business.
• Operational costs (excluding exceptional items) were £266 million (2009: £267 million), reflecting a reduction of £8 million in power costs, partially offset by additional charges of £4 million for bad and doubtful debts.
• Net debt of 71% of Regulatory Capital Value (RCV) (2009: 72%).
• A successful £140 million index-linked bond issue in March 2010 contributed to a robust liquidity position, with £669 million of cash and undrawn bank loans as at 31 March 2010, meaning that the business is well funded into the next regulatory period.
• Sector leading credit ratings, with the senior bonds being rated A (negative outlook) by Standard and Poor’s, A by Fitch, and A3 by Moody’s.

Operational performance

• Customer satisfaction remained high, with 83% of customers in independent tracking research reporting that they were ‘satisfied’ or ‘very satisfied’ with the service provided by Welsh Water and the company scoring 4.72 out of 5 on Ofwat’s customer satisfaction measure of telephone call handling.
• Continued high levels of bacteriological compliance for drinking water quality ‘at the tap’ of 99.95% (2008: 99.95%).
• A reduction of almost 20% in sewer flooding incidents to 317 (2008-09: 392).
• For the 2010 summer season, Welsh beaches and marinas were awarded a record 50 Blue Flag awards, around a third of the UK total.
• Further reductions in level of leakage to 7.1m3/km/day despite increased burst rates due to exceptionally severe winter weather (2008-09: 7.2m3/km/day).

Major capital investment programme:

• Capital investment of £361 million (2009: £355 million) benefiting customer service, environmental quality and drinking water quality. This brings the total capital investment since April 2005 to £1,521 million (equivalent to more than £1,000 of investment for every household served).
• Rapid progress in delivering our enhanced drinking water quality protection programme with UV disinfection operational at 23 sites and further enhancements and improvements to drinking water treatment stages at 26 sites, primarily in north Wales.
• Completion of a £13 million extension of the Cwellyn water treatment works in Snowdonia, reducing the risk of a repeat of the serious water quality issues which arose there in November 2005 and protecting the quality of drinking water to 30,000 customers in the Caernarfon and Bangor areas.
• Construction started on renewable energy schemes that will deliver 35 GWh of green energy a year when completed next year.

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.
• Since 2001, Welsh Water has outsourced 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 have reduced our operating costs by more than any other water company and delivered improved quality and customer service. On 9 February 2010, Welsh Water announced that it would not be continuing with its outsourced operations contracts with United Utilities Operating Services and Kelda Water Services, following extensive discussions with those partners through the five-yearly contract price and performance review. Since then, some 1,600 people have transferred to Welsh Water, which now operates its main water and wastewater services directly.
• 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 caped 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 over 83% of customers being either ‘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.
• Dame Deirdre Hine was appointed a Non-Executive Director in 2001 and her standing down is the latest stage in a continuing process to refresh the Board. Further announcements will be made in due course.

Ends