Dŵr Cymru Welsh Water has reported a strong operational and financial performance in 2014-15 and a record upcoming £1.7 billion investment for AMP6 with the publication this morning of its preliminary annual results.

The company has reported an underlying profit of £77 million which, as it has no shareholders, will all be reinvested in the business for the future benefit of customers and the environment.

Operating costs of £295 million were lower than in the previous year (2014: £296 million) while underlying profit of £77 million to be reinvested for the benefit of customers rose(2014: £50 million).

During the period Welsh Water made a record capital investment of £379 million (2014: £354 million), which included upgrading and commissioning the water treatment works in Llyn Conwy (£12 million), Alaw (£11 million) and Cefni (£17 million) in north Wales – part of a wider £120 million investment in 12 water treatment works. Other investments included:

• £15 million invested in the RainScape sustainable drainage programme in Llanelli and Gowerton which offers an innovative solution to tackle urban flooding
• Investing £24 million in transforming Five Fords wastewater treatment works into an innovative Energy Park - incorporating solar, advanced anaerobic digestion, wind and hydro generation schemes at the site
• Investing £20 million in buying 14 hydro turbines at various reservoirs across Wales. This has doubled the amount of renewable energy Welsh Water  generate -the hydro schemes produce 40GWh of energy which is enough to power 9,000 homes.

Welsh Water said the preliminary financial results reflect how the company is embedding new, innovative approaches to improve further customer service and environmental performance, including:

• introducing a new and innovative social tariff - HelpU, which will benefit up to 100,000 customers.
• the successful roll-out of its urban drainage scheme, RainScape, in Llanelli and Gowerton which offers an innovative and sustainable solution to tackle urban flooding. The company has already invested £15 million in the scheme and a further £60 million has been allocated for similar schemes around Wales between now and 2020.
• work to improve water catchment management to reduce the amount of grassland herbicides entering water sourced for drinking water purposes - more than 100 farmers have already signed up to help Welsh Water as part of the company’s Weed Wiper initiative.
• developing a new ‘smart network’ to help the company to predict more accurately where blockages and bursts might occur on networks.
• continuing to strengthen the resilience of its drinking water network which will include investing around £30 million in Bryn Cowlyd Water Treatment Works near Dolgarrog, which serves Llandudno, Colwyn Bay and the surrounding area.

Welsh Water said the company’s performance over the year, combined with its move to embrace innovative solutions, placed it in a strong position to meet the challenging efficiency targets set by the regulator Ofwat for 2015-2020. During this time the company is to achieve efficiencies of around 20%. 

In May the company confirmed that it will reduce its workforce by 360 during the 2015-20 AMP6 period to help deliver Ofwat’s efficiency improvement. The company expects to achieve the reduction via a combination of voluntary redundancies, retirements and the non-replacement of roles as a result of annual job churn. As part of a consultation exercise on voluntary redundancies 250+ employees have already come forward.

Welsh Water currently employs approximately 3,000 people across Wales, Hereford and parts of Deeside.  The company has also had recruitment controls in place over the last 12 months to reduce the number of contractors and agency workers. 

Welsh Water’s Chief Executive Chris Jones commented:

“This is our most ambitious investment programme to date and reflects our commitment to ensure customers can have complete confidence in our essential services. Our programme drives further innovation, learning from international best practice.

“While delivering our record investment programme, we are aware of the difficulties some of our customers genuinely face in paying their bills. That is why we have launched a new social tariff which will help up to 100,000 of our most disadvantaged customers.

“With the continued commitment of our colleagues, and our increased focus on innovation, I am confident that we will rise to the challenge so that we can continue to deliver industry-leading levels of financial, operational and environmental performance which are crucial to ensuring that we realise our vision of earning the trust of our customers every day.”

Customer reserves now stand at nearly £2 billion as at 31 March 2015, a ten-fold increase since 2001 when Glas Cymru acquired Dŵr Cymru. Gearing – total net borrowings as a percentage of regulatory asset value – has fallen to 59.7% from 93% in 2001. Glas Cymru, which was formed in April 2000 for the sole purpose of acquiring and owning Welsh Water, has the highest credit rating in the UK utilities sector. As a ‘company limited by guarantee’ its business model is unique in the water industry - it has no shareholders which means that all financial surpluses are reinvested in the business for the benefit of customers.