Looking ahead to its major SR27 procurement, Scottish Water Chief Executive Alex Plant says that the future should be one of true partnering, not client and supplier, by collaborating and sharing resources and knowledge, working as one team to challenge and innovate.

The water company chief was commenting in Scottish Water's newly-released Interim Performance and Prospects Report and Accounts 2024 which show how it is delivering more sustainable and cost-effective solutions for its customers.

During the period, revenue in the regulated business increased by £68 million (9%) to £790 million as charges recovered some ground lost over recent years when the company kept charges lower to protect customers during Covid-19 and the cost of living crisis but which still remain below CPI inflation.

However, Scottish Water’s surplus before tax decreased by £13 million to £49 million as the increase in revenue was offset by higher repair costs, increased depreciation and the prior year one-off benefit of a rates rebate. Capital expenditure increased by 5%, to £379 million, as the utility’s investment programme continued to build momentum. This was achieved through the planned use of £180 million of its cash reserve.

Chief Executive Alex Plant said that he nevertheless remained concerned about the ongoing rise in repair and refurbishment costs, describing this as “a symptom of the fact that we are not replacing our assets as quickly as we need to, and as a result dealing with such older assets becomes more expensive.”

Writing in the interim financial report, the Scottish Water chief said the organisation was committed to looking at new bolder and innovative ways of working to deliver cost and sustainable effective solutions while ensuring customers get the best value for money. He commented:

“We have made a very good start to the year, improving performance in key areas such as leakage and environmental performance and stepping up the delivery of our investment programme.

“Whilst the water sector faces challenges, our model in Scotland is working well, delivering good outcomes for customers and the environment, maintaining service quality today and building a viable platform for the future.”

Utility faces ongoing challenges

However, he also highlighted ongoing challenges which the utility is facing, including changes to the climate and aging assets, pointing out that everyone has a part to play in safeguarding Scotland’s water supply by using less and by doing their bit to protect assets such as sewers to prevent pollution and flooding.

Alex Plant said:

“We know our customers have high expectations of us, including high-quality drinking water, first-class customer service and the protection and enhancement of the natural environment.

“We also know they need us to do this efficiently so we can keep bills as low as possible. At this mid-year point we are in the green in most of our performance areas, helped by more benign weather than in recent years.

“But we know and are prepared for the colder winter months and the general increased likelihood of storms and extreme weather which affects our assets, many of which were not designed to cope with today’s weather and which are ageing and coming to the end of their intended lifespan.

“As we had forecast, repair costs continue to rise – compared with the same six-month period last year, we have already seen a 15% increase, up from £139 million to £161 million. Sustained investment to replace assets that are at or beyond the end of their useful lives will be vital to ensuring we can maintain service standards and create the right conditions to meet future challenges too.

“As we look ahead, despite the significant headwinds facing us, I feel we are well positioned to drive performance, demonstrate efficiency, deliver our investment plans, and protect and enhance the environment.

“We are fortunate at Scottish Water to have customers who trust us, a government which is proud of us, regulators who want to work with us and partners who want to help us transform. This is hugely valuable and provides the basis for us driving ourselves to be bolder, more innovative, quicker in our effective decision-making and ensuring we can make the case for the investment we will need in the future.”

Net Zero on Track

The report also highlights how the organisation is on track to become Net Zero by 2040 and is looking to embrace new approaches that deliver lower whole-life cost, lower carbon and that bring wider social and environmental benefits including more nature-based solutions.

It covers the first six months of the financial year, from 1 April to 30 September 2024.

Alex Plant - "the future should be one of true partnering, not client and supplier"

Looking further ahead, Alex Plant writes in the report:

“The world out there is changing fast – most clearly because of a rapidly changing climate – and so must we all. Most of our assets were not designed to cope with the extremes of weather that are now the norm. Many are ageing and need extra maintenance to remain serviceable before ultimately needing to be replaced.

“We know we need to embrace new approaches that deliver lower whole-life cost, lower carbon, bring wider social and environmental benefits, and help us achieve our target of net zero emissions by 2040. More nature-based solutions will be a key part of that, and I know we will need partners who will relish working differently.

“The future should be one of true partnering, not client and supplier. This means collaborating and sharing resources and knowledge, working as one team to challenge and innovate, share successes and stand shoulder to shoulder when things go wrong. This mindset is at the heart of our approach to our major SR27 procurement, which will be a key focus for us all over the coming months and I am very much looking forward to hearing the ideas that potential future partners will come forward with during that process, including how we can deliver more nature-based solutions.”

Scottish Water is responsible for 1,838 waste water treatments works, 229 water treatment works, more than 64,000 miles of water and sewer pipes and supplies 2.64 million households. It employs more than 4,600 staff and work with hundreds of delivery and supply partners, most based in Scotland.

Click here to download the full report.