Anglian Water is on track for an anticipated £10 million of outperformance rewards for 2020/21, according to its preliminary results for the year ended 31 March 2021 published this morning.
The water company is highlighting a continued strong operational and financial performance and on-track delivery of capital programmes despite the impacts of the Covid-19 pandemic. No government support was requested during the pandemic, no employees were furloughed and the automatically applied Business Rates Relief, received for its recreation businesses, has been repaid in full.
Anglian has maintained its industry-leading leakage performance and exceeded its regulatory target for the 10th year running despite winter weather, with 81% of performance commitments assessed to be on track
The first year of the AMP7 five-year investment programme saw the delivery of 520 environmental schemes, compared with a total of 1,000 schemes delivered in AMP6 between 2015 and 2020.
Anglian’s five-point plan for green recovery has secured a £300 million accelerated investment in environmental programmes through the Water Industry National Environment Plan (WINEP) at no additional cost to customers, with ‘amber’ schemes progressed to ‘green’.
Anglian Water is also announcing this morning a new financing structure which will lead to lower leverage, together with the launch of a sustainability-linked bond framework to facilitate ground-breaking net zero bonds aligned to newly announced transitional carbon targets to 2025.
A new group financing structure is being implemented to enable a reduction in gearing in the company. The water company said this will enhance and protect its credit ratings, allowing it to borrow at competitive rates to support investment.
The utility has also launched a five-point Community Recovery Plan, underpinning support for community recovery post-Covid.
Group revenue of £1,351.8 million represented a decrease of £68.1 million (4.8 per cent) on 2020. Anglian said this was consistent with the price reduction for customers following Ofwat’s PR19 Final Determination and reduced demand from non-household customers, offset in part by increased demand for household customers due to Covid-19.
Adjusted profit before tax1 (PBT) for the period of £142.2 million, was up £68.2 million, primarily the result of the non-cash impact of lower inflation on index-linked debt due to a fall in year-on-year average Retail Price Index (RPI) and Consumer Price Index (CPI).
There were no dividend payments in the year to the shareholders of Anglian Water Group Ltd (AWGL), the ultimate parent company, (2020: £67.8 million). Based on the available free cash flow there was capacity to pay a dividend of £203.6 million - the utility’s Directors have proposed payment of a final dividend of £96.3 million. However, at this time there is no proposal to pay a dividend to shareholders of AWGL.
Anglian is reporting a strong start toits £3.0 billion AMP7 capital investment programme. Gross annual capital expenditure across the business of £448 million (£221 million on capital maintenance, £226 million on capital enhancement and £1 million non-appointed) is broadly in line with management expectations and achieved despite the challenges of the pandemic.
Commenting on operational performance, Anglian said its strong track record on carbon reduction had enabled the launch of ground-breaking net zero bonds based on new 2025 interim carbon targets: a 30 per cent reduction in operational carbon from a 2018/19 baseline and a 65 per cent reduction in capital carbon from a 2010 baseline
In July the utility will launch a detailed routemap to 2030 net zero target for operational carbon and 70 per cent reduction in capital carbon.
Anglian has also reported its best-ever performance on renewable energy in 2020/21 with 134.4 GWh generated from on-site assets, including new 42,000-panel solar array at Grafham Water, energised in September
The utility is the first UK water company to be included on the CDP Global A list for its response for climate change, reaching the top 3 per cent of 9,600 companies globally.
Looking ahead, Anglian’s smart meter programme is underway with 164,406 smart meters delivered in year one. The Strategic Pipeline Alliance has also begun delivery of a £400 million strategic interconnector programme to move water around the region. The site for relocation of Anglian Water’s Cambridge Waste Water Treatment Plant has also been selected.
The water company is also continuing its engagement with the Regulatory Alliance for Progressing Infrastructure Development (RAPID) on proposals for two large-scale multi-sector reservoirs, to be delivered in AMP10 (2035-40).
Commenting on Anglian Water’s preliminary results for the full year to 31 March 2021, Chief Executive Peter Simpson said:
“This past year has been challenging in ways previously unimaginable. Systems designed for a nine-to-five, commuter-orientated and office-based lifestyle have changed beyond recognition to support a home-based, flexibly working, home-schooling society. That is as true for our water supply and recycling networks as it is for the transport arteries of the country, or the high street’s retail offering.
“The pandemic triggered huge change in customer consumption of water: the combined impact of stay-at-home orders and hot weather saw demand soar, stretching our network capacity to its limits. We have put more than 1.4 billion litres into the network in a single day just eight times in the past 14 years; seven of those were in 2020. Water recycling was impacted too: peak usage shifted during the day, with different and often smaller water recycling centres carrying the weight of a population that wasn’t travelling into urban centres. This was followed by both the wettest winter since 1915, which saw pockets of persistent flooding spread out over significant areas of our region, and a prolonged series of sub-zero overnight temperatures, a combination which resulted in increased ground movement leading to 63 per cent more bursts than during 2018’s Beast from the East.
“Alongside the challenges of Covid-19 and dramatic weather patterns – a further reminder of the urgency of tackling climate change – we have also facilitated the Competition and Markets Authority (CMA)’s redetermination of our five-year Business Plan to 2025. We have emerged with clarity on our position for the remaining four years of our plan, and with a strong foundation for future resilience and growth. We remain grateful to the CMA for its careful consideration of the points we raised.”
“In the circumstances, to be reporting a likely outperformance reward of £10 million (2020: £9.5 million) is a performance of which we are very proud. “
Anglian Water is the largest water and water recycling company in the UK by geographic area, and fourth largest by regulated capital value. It serves nearly seven million domestic and business customers in the east of England and Hartlepool.