Wessex Water is warning that the chemical supply chain has become increasingly fragile and improving its resilience will require government focus – otherwise the challenges will only increase.

The warning comes in the company’s interim results for the six months to 30^th September 2021 – with Wessex Water reporting that it has maintained a strong performance in the first six months of this year.

However, the water company is warning that in the last 2 years its supply chain has become increasingly less resilient, “so much so that this risk has been added by the Board as a principal risk to the performance of the regulated business.”

While operationally the firm’s business continuity arrangements have been able to manage out the impact of many logistical issues it has experienced, Wessex said the chemical supply chain has been “increasingly fragile” despite the company and sector stepping up its emergency arrangements.

Pointing out that there has been a reduction in the number of suppliers of certain products in the UK and Europe, and reduction of capacity/storage in the UK, the interim report says:

“To sustainably improve the resilience of this supply chain will require national / government focus as otherwise the challenges will only increase.

“On a wider basis, supply chain disruptions, for example due to the impact of Covid, with decreased supply have resulted in price increases and shortages or substantially longer lead times. The impact will be both increased costs not yet represented by inflation and further delays (on top of those caused by Covid) to project and programme delivery.”

Dividends rise to £35.5m, - an increase from £25.0m for same period last year

Wessex Water said it has maintained a strong performance in the first six months of this year, despite the continued impact of Covid-19 on customers, communities and businesses across its region, according to its interim results for the six months to 30^th September 2021.

Financial results for the six months to September 2021 showed turnover increased by £5.6m from £254.3m to £259.9m. Regulated tariff turnover increased by £7.6m, mainly due to price rises allowed by Ofwat combined with a return to normal operating patterns for Household and Non Household revenues as Covid‐19 impacts reduce.

Gross capital investment for the six months was £126.0m, an increase on £115.9m last year which is consistent with the timing of the construction programme for the current regulatory period.

Operational costs (excluding depreciation and amortisation) increased by £5.7m from £108.3m to £114.0m. Wessex Water said the increase was due to upward pressures on costs due to general inflation, new obligations, power costs and Covid ‐19, all partially offset by on‐going efficiency programmes.

Operating profit decreased by £4.7m from £84.3m to £79.6m, while profit after taxation fell from £33.0m to a loss after taxation of £67.8m.

Dividends declared for the six months to 30 September 2021 were £35.5m, an increase from £25.0m for the same period last year.

Referring to recent media coverage of storm overflows and the impact on rivers and beaches, the interim report says that across the Wessex Water region there are only eight water bodies out of a total of 444, where failure to meet environmental standards is in part due to the impact of storm overflows.

Wessex already have a programme of work in place during the AMP7 regulatory period and will be bidding for additional funding as part of PR24 submission for the AMP8 2025-30 investment period.

"We need our regulators to help us unlock solutions that will enable society to pay less for more environmental improvements"

Commenting on the results, Chief Executive Colin Skellett said:

“We fully support the proposed provisions within the Environment Bill that will require companies to progressively eliminate any harm from storm overflows. We already have a programme of work during this regulatory period and will be bidding for additional funding as part of our PR24 submission.

“Wherever possible, we will use nature-based solutions to solve storm overflows problems. This is part of a wider approach to minimise our carbon footprint.”

“Our vision is to be recognised as a leader in environmental stewardship, but to do this we need our regulators to help us unlock solutions that will enable society to pay less for more environmental improvements.”

Working with Frontier Economics Wessex Water recently set out proposals for a move to outcome based environmental regulation, which the firm hopes both government and regulators will embrace as part of the next periodic review.

The firm’s routemap to net zero with a commitment and plan to achieve net zero operational carbon emissions by 2030 and full net zero total emissions by 2040.

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