United Utilities is planning to accelerate its AMP6 2015-20 investment programme and expects to invest  around £800 million in 2015/16, according to its latest results for the six months ended 30th September 2015 published this morning.

Despite being hit by a major water quality incident during the period when it had to issue a ‘boil water’ notice to over 300,000 properties (10% of its customer base), the company has reported a strong operational and environmental performance.

The balance of ratings for United Utilities (UU) across the fourteen Ofwat KPIs puts it in joint top position, in respect of the ten water and sewerage companies.  The company also achieved the lowest number of serious pollution incidents, by length of sewer, in England.

Revenues of £857m were down on 2014, which saw revenues of £859.4m for the same period. Underlying operating profit also fell – down from £343.1m in 2014 to £308.6m in 2015, while operating profit has fallen from £340.5m to £278.3m. However, in line with policy the interim dividend paid to shareholders has been increased by 2% to 12.81p per share – up from 12.56p in 2014. United Utilities said a substantially improved service incentive mechanism (SIM) performance had averted the risk of incurring a possible £80 million revenue penalty in Ofwat’s PR14 determination to the benefit of its financials in AMP6.

£100m-plus of non-regulated investment principally in solar power

In addition to its £3.5 billion+ five-year regulatory capex programme, the water company is expecting to invest over £100 million in non-regulated projects, principally relating to solar power.

Commenting on the results, United Utilities said an engineering-led 'systems thinking' operational approach which integrates the use of its assets, leverages data intelligence and employs technology and new work processes, is supporting its drive for further improvement.

The approach, which involves capturing and processing data from multiple information points, is aimed at ever-improving asset intelligence. United Utilities has fitted sensors in its water networks to provide visibility as to how they are performing, helping to reduce burst frequency. The firm is also currently piloting drainage system performance monitoring in its wastewater networks.

 Across its digital network, over 80% of United Utilities’ sites are now connected to a new telemetry system. The firm’s integrated control centre in Warrington, acts as the ‘digital brain’ of its systems approach.

For the last few years the water company has considered its treatment works as ‘factories’, each with its own production line. United Utilities now has over 600 ‘factories’, small and large, producing clean water, bio waste and energy.

Individual managers are responsible for the performance of their production lines including investment of capital to optimise operational performance, to deliver environmental or water quality requirements and to maximise energy production.

AMP6 regulatory outperformance targets to be set in May 2016

On regulatory outperformance, United Utilities intend to set targets for the 2015-20 period at the group’s full year results next May. The water company said it had exceeded all the targets it had set for outperformance on opex, capex and financing in AMP5, enabling it to reinvest around £280 million for the benefit of stakeholders.

Commenting on its AMP6 alliance partners, consisting of a single engineering partner and four new design and construction partners, United Utilities said it is involving partners much earlier in project definition and packaging projects by type, geography and timing to deliver efficiencies. Projects will be allocated to partners on an incentive basis or competed between the partners and where appropriate third parties. “Our partners have come forward with a range of solutions, innovations and pricing and early results are encouraging.”, the results say.

Firm is “well-positioned” for full opening of competitive business retail market in 2017

United Utilities is “well positioned” for full opening of the competitive business retail market in 2017, the results say, describing the firm as “very active” in this expanding market. The water company has already established a strong presence in Scotland and is building its capability to ensure it is in a strong position as the market evolves, After attaining a Scottish water supply licence in 2012, United Utilities grew quickly and is pursuing continued expansion.  One of the most successful new entrants in Scotland, the company hasnow won over 250 customers, covering over 3,000 sites and representing annualised revenue of c£18 million.

We remain a leading new entrant, although our selective bidding for business at attractive margins means we are not solely focusing on growing market share. We also continue to offer and develop our range of value-added services, such as leak detection and repair, waste digestion and wastewater system optimisation.

Steve Mogford, Chief Executive Officer, said:

"Our strong performance across 2010-15 means that we enter the next five-year period with good momentum. We were delighted to end last year as one of the top water and wastewater companies, as measured by Ofwat's recently published KPIs and the Environment Agency's latest assessment.

"Investment ahead of the 2015-20 period gave us a smooth start to our five-year programme, which we are accelerating to deliver further improvements for customers and the environment. We expect to invest around £800 million this year.

"Having delivered sector leading improvement in customer satisfaction over recent years, we were disappointed customers in parts of Lancashire were inconvenienced as a consequence of a water quality incident this summer. We restored water quality as quickly as possible and full service was resumed by early September.  We paid customers compensation and this, along with associated costs, will be borne by the company.  We are working closely with the Drinking Water Inspectorate on the incident who will issue its report in due course.

"Our progress over the first six months of this new regulatory period underpins our confidence that our targets remain tough but within reach. We are well placed to deliver further value for customers, shareholders and the environment underpinned by a robust capital structure and good credit ratings."