United Utilities has published its Annual Report and Accounts for the financial year ended 31 March 2010. The company said it was “well-positioned” for the AMP5 period 2010 to 2015.

Operating profit for the year was £817.9 million compared with £729.5 million in 2008-09. Overall revenue was £2,439.1m – up from £2,427.2 m in 2008-09, with revenue from regulated activities up 3% from £1,499.5m to £1,541 million, principally as a result of the 6% price increase allowed by Ofwat (including inflation of 3.0 per cent).

As part of its strategy of focusing on core activities, United Utilities disposed of its investments in Northern Gas Networks and Manila Water during the second half of 2009/10, crystallising approximately £132 million for the group. In May 2010, the group also agreed the disposal of its Australian business for approximately £135 million. United Utilities said it was continuing to evaluate the expressions of interest it has received for its remaining non-regulated businesses.

The company said it had had to make some difficult decisions with regard to the internal structure of the group which it attributed to the new efficiency targets as part of the regulator’s price limit proposals. As a result, approximately 500 people left the group during the 2009/10 year. During 2009/10, United Utilities reduced the number of people working in the group by the equivalent of around 500 full time employees, including United Utilities staff and agency staff. Approximately 350 of the 500 worked in or supported the regulated business, equivalent to around 7% of that workforce.

United Utilities is continuing to review and streamline its processes in order to become a leaner, more efficient company. In addition to halving the number of steps from metering to cash collection, the group is also rationalising its IT infrastructure, providing greater automation and visibility of workflow.

Renewable energy generation increased during the year to 107GWh - up from 100GWh in 2008-09. During 2009-10 unit power costs were approximately 10 per cent higher than in 2008/09 - an increase of around £6 million. The business has now entered into forward contracts for the majority of its power requirements for 2010/11 and 2011/12 and unit power costs are expected to be in the order of 20 per cent lower than in 2009/10.

The group said it would continue to focus on delivering benefits from its existing efficiency initiatives, such as its workforce management system which is a key element in improving the efficiency of frontline staff, utilizing remote operational site management and optimisation of chemical and power usage, improving efficiency of operational pumps, developing combined heat and power assets, which recycle energy generated from wastewater treatment processes, and improving supply chain management to deliver further procurement economies.

Efficiency schemes are key to reducing UU's carbon emissions

A number of the efficiency schemes are also key elements of United Utilities’ plan to mitigate its carbon emissions. In 2009, UUW was awarded funding from Defra to convert biogas, a by-product of the sludge treatment process, into bio-methane for vehicle fuel, with the potential in the future to export biogas into the national gas distribution network. If successful, this will be the first such plant at a UK wastewater treatment works.

A major part of the company’s carbon strategy is generating renewable energy from sludge and other sources. The company is planning to invest £15 million in a mitigation programme to reverse the increase in its overall carbon footprint attributed to its water quality investment programme, which it says is often be energy intensive using current best available technology.

In June 2009, United Utilities, via the 4D consortium, won a new capital delivery contract with Southern Water to manage the design and build of a new wastewater treatment works in the Brighton and Hove area. The contract is underway and construction is expected to take approximately three years, followed by the potential for a two-year contract to operate and maintain the new plant. In addition, the 4D consortium has responsibility for managing part of Southern Water’s regulatory capital investment programme through to 2015.

2010 saw the end of two big contracts for the company. A contract with Scottish Water, via Scottish Water Solutions Limited in which United Utilities is a major partner, finished in March 2010, while in February 2010 Welsh Water announced that it intended to take operations and maintenance services in-house, meaning that its AMP4 contract with United Utilities would not be renewed for 2010–15.

United Utilities Group PLC is the UK’s largest listed water business. The company owns and manages the regulated water and wastewater network in the North West of England, through its subsidiary United Utilities Water PLC (UUW), which is responsible for the vast majority of the group’s assets and profit. Between 2005–10, UUW carried out a £3 billion-plus investment programme, with £620 million of capital expenditure, including infrastructure renewals expenditure, during 2008-09.