Anglian Water’s operating profits have fallen 24.8% from £452.6m to £340.4 million, according to its latest financial results for the year ended 31 March 2016 – the company has attributed the drop to the PR14 regulatory price reduction, increased operating costs and depreciation.
Revenue for the year was £1,185.4 million, down £58.9 million from £1,244.3m in 2015 (4.7 per cent), primarily reflecting the reduction in customer bills which came into effect on 1 April 2015 in line with the regulatory price setting review, partially offset by customer growth in the region.
Operating costs for the year increased by £36.7 million (7.0 per cent) to £560.6million (2015: £523.9 million). Almost half of this increase is due to a rise in minor repair costs which used to be capitalised under the old infrastructure renewals accounting rules and has consequently increased volatility in operating costs.
AMP6 gross capex expenditure in the appointed business for the year was £265.6 million (£163.2 million on capital maintenance, £102.4 million on capital enhancement), compared to £394.0 million in the last year of AMP5, which included £55 million of AMP6 transition expenditure. Anglian will be investing over £2.1 billion in total through its investment programme over the five years of AMP6.
Significant projects worked on during the year include the Grafham Water resilience scheme which involves redirecting water from Rutland Water, and a major refurbishment of the Semer water treatment works in Suffolk. “As expected in the first year of a new AMP there were no major schemes completed in the year”, the company said.
“My Customer” approach to provide tailored and personalised service
Commenting on operational performance, the utility said growth in the team has been underpinned by the introduction of a new way of working known as ‘My Customer’, which gives staff the know-how and the freedom to provide a tailored and personalised service.
New ways of gathering real-time feedback from customers is also helping customer support teams address issues before they become problems for, while the Digital Customer Service team continues to rapidly grow the number of customer interactions handled via social media channels.
More than 3,000 customers have been accepted onto the new LITE tariff, which discounts the bills of customers in vulnerable circumstances. Anglian also runs a number of other schemes for customers who struggle to pay their bills, including the Aquacare Plus and Watersure tariffs. Altogether, these schemes are providing assistance to more than 75,000 customers.
In 2015/16, the firm began to phase out the SoLow tariff, which was originally introduced to help customers moving from a fixed tariff (based on the rateable value of their property) to a metered charge.
According to Anglian, the subsequent significant growth in the number of households which have a meter fitted means the SoLow tariff is no longer the fairest way to charge for water: a small number of fixed-tariff customers are subsidising a large number of metered customers.
Meters - 86k new meters to be installed and 412k to be ungraded over next five years
Over the next five years, the Integrated Metering and Developer Services (IMDS) alliance will be installing 86,000 new meters, upgrading another 412,000, and visiting 120,000 customers to offer efficiency tips and install water-saving devices.
Anglian Water is using a new approach - ‘Wave’ - to target this work geographically, concurrently working on multiple water efficiency projects in a single area, to increase the efficiency of the work and minimise disruption to communities. In the first year of the AMP the programme focused on Norfolk and Buckinghamshire, where the water company installed 12,000 new meters, exchanged another 45,000, and carried out 16,000 water efficiency home visits.
Anglian is also targeting leak prevention and repair and aiming to bring down leakage by more than 10 per cent, or 20 Ml/d, by 2020, compared to performance in 2014/15 - significantly more than the target agreed with Ofwat.
In other areas, Anglian’s catchment management strategy is continuing to target a reduction in the amount of metaldehyde entering waterways and reservoirs, or reaching water treatment works.
New IRIS telemetry system creates largest remote monitoring network of its kind in Europe
The water company also completed the transition to its new IRIS telemetry system during 2014/15, creating the largest remote monitoring network of its kind in Europe. The benefits of the new system include more effective, risk-based intelligent alarms, presenting the business with a clearer view of incidents most likely to present a real risk to operations. Manual filtering of alarms and unnecessary site visits are minimised, while jobs are raised and cancelled more efficiently.
Anglian said it would now use the system to increase proactivity, pinpointing poorly performing assets and prioritising work more effectively.
Advanced in preparation for retail market opening in 2017
On upcoming competition, the utility said its business retail arm, Anglian Water Business (AWB), is advanced in its preparation for the opening of the market to supply non-household customers in April 2017 - in April 2015, AWB moved into its own office with separate IT and telephony systems, and is now operating independently of the wholesale operation. Anglian Water Services Ltd is also preparing for competition and has established a Wholesale Service Centre, which will be the single point of contact for all retailers.
New scheme targets long-term sustainability of water resources
The results also highlight what is described as the company’s “greatest contribution to the long-term sustainability of water resources” in the region, the Water Resources East Anglia (WREA) initiative, which was launched this year. The scheme is seen as a leading example of a collaborative, multi-sector planning initiative set up to address future supply-demand challenges, with the aim of securing the best possible outcome for as wide a range of stakeholders as possible.
WREA brings together the region’s water companies, farmers, food producers, conservationists and regulators to develop a joint, long-term plan for water stewardship. In the coming year more detailed technical planning will be completed, with plans to complete the project in 2017.
Energy and carbon measures deliver considerable financial savings for firm and its supply chain
On energy use and carbon reduction, Anglian said its leading approach in the measurement, management and reduction of both operational and capital carbon was continuing to deliver considerable financial savings, both within the company and throughout the supply chain. The firm follows the principles set out by HM Treasury’s Infrastructure Carbon Review in recognising the value of low-carbon solutions in how it builds and operates assets.
Last year the water company organised a Carbon and Energy Leaders Conference where representatives from Anglian Water, suppliers and partners met to discuss how to work collaboratively to meet targets for 2020, developing reduced-cost, reduced-carbon solutions.
Annual gross operational carbon emissions have decreased by 5 per cent in 2015/16 in comparison to the 2014/15 baseline decreasing from 455,335 t/CO2e to 432,646 t/CO2e. The main influencing factors include a further increase in renewable generation, a 2 per cent reduction in electricity imported from the grid and decarbonisation of the grid by 7 per cent which was slightly offset by an increase in the emissions factor for methane.
The report says Anglian’s design engineers and Capital Delivery Teams have delivered a 53% per cent reduction in capital carbon against a 2010 baseline, through focus on design, materials used and installation and commissioning techniques in construction.
The water company is also self-generating an increasing amount of power from renewable energy - this year producing 112GWhs, an increase of 12GWhs on last year and around 16 per cent of the electricity used. Most of this is generated by Combined Heat and Power engines (CHPs), which are fuelled by the biogas produced at sludge treatment centres. This year they produced 96GWhs, a threefold increase in output compared to 2010.
Anglian also has wind turbines at March and Newton Marsh Water Recycling Centres, and has entered into strategic partnerships with eight companies who will fund and install solar arrays on its sites. The first five were commissioned and installed this year by HBS New Energies and Lark Energy, four on spare land at water recycling centres, and the fifth on the roof of Hall Water Treatment Works. Together, the arrays will generate at least 1.5GWhs of renewable energy each year.
Flooding “a complex problem”
The results describe fooding from surface water and sewers as “a complex problem, and one of the most challenging scenarios that we and our customers face. “
Anglian Water is collaborating with the Environment Agency, Internal Drainage Boards, and 21 Lead Local Flood Authorities (LLFAs) in the region to support flood prevention projects with benefits for our customers - an approach which has resulted in £8.4 million of partnership funding being made available for AMP6.
Firm used opportunities due to relatively mild winter to create buffer for potentially tougher years in AMP6
Commenting on the Company’s financial results and operational performance for the year ended 31 March 2016, Peter Simpson, Anglian Water Group’s Chief Executive, said:
“As a result of efficiencies we made during AMP5, we have been able to start AMP6 offering our customers the greatest reduction in bills of all water and sewerage companies. “
“Despite the fall in revenue that follows the bill reduction, and the significant challenges posed by the introduction of stretching Outcome Delivery Incentives (ODIs), we have delivered a year of very strong performance.”
“It is significant that this has been achieved in the wake of a challenging AMP6 determination requiring a step change in our performance to meet higher customer expectations, new ODI and SIM targets and complex regulatory outputs, all while absorbing unfunded cost pressures. “
“Our performance may have been assisted by a relatively mild winter, but we have capitalised on the opportunities that presented to create a buffer that will help us withstand potentially tougher years later in AMP6.”
“Our unique approach to long-term relationships with our capital programme and maintenance delivery partners, delivered via four Alliances with main contractors, underpins our increasingly collaborative approach to dealing with the challenges we face, ranging from infrastructure creation and maintenance to customer and community engagement. These Alliances are now well established, and we expect to see considerable benefit for ourselves and our customers as these relationships mature over the coming 15 years. “