United Utilities has accelerated its capital investment programme with a £49m increase to £836m in 2013/14, and  initiated around £40m of transitional investment to aid a smoother and more effective start to AMP6,  according to its latest financial results for 2013/14 published this morning.

During the year United Utilities increased capital investment in its network to £836 million, including £165 million of infrastructure renewals expenditure.  The firm is reinvesting around £280 million of outperformance for customer and environmental benefits, including c£200 million of capex outperformance and  c£40 million of financing outperformance being reinvested in private sewers costs.

Revenue was up by £69 million to £1,705 million, principally as a result of the impact of the regulated price increase for 2013/14. Underlying operating profit up rose by £37 million to £641 million – attributed to both the rise in revenue and tight cost control.

Now the second largest player in competitive retail market in Scotland

The company has also furthered strengthened its position in the competitive Scottish water market – the utility is now the largest new entrant and second largest water retailer after Business Stream.

United Utilities said it had been building its capability and experience over the last two years to help ensure it is in a strong position as the competitive business retail market evolves, describing itself as “very active in this expanding market.  After obtaining a Scottish water supply licence in 2012 the firm has already won around 150 customers, covering around 2,000 sites and representing annual revenue in 2014/15 of around £10 million. The utility said it also has “a significant pipeline of opportunities” and would continue to offer and develop its range of value-added services.

Commenting on the results, Steve Mogford, Chief Executive Officer, said:

“Customer satisfaction continues to improve, underpinned by strong operational and environmental performance, and we believe there is scope to deliver further improvements. We are continuing to improve the quality, reliability and resilience of our assets and increased capital investment in our network to £836 million this year. We are reinvesting around £280 million of our outperformance, providing benefits for customers and the environment.”

“We have been building our retail capability over the last two years and have rapidly secured a position as the second largest water retailer in Scotland. Our experience in Scotland will place the company in a strong position, in advance of full opening of the English market for business customers in 2017.

The company is currently working closely with water industry regulator Ofwat, ahead of submission of its revised AMP6 business plan on 27th June - in particular over plans for  £1.1 billion worth of expenditure on its wastewater network. Ofwat’s initial view on wastewater totex indicated a £1.1 billion difference, compared with United Utilities’ business plan submission which asked for around £1 billion of wastewater totex to be given specific consideration. The company is now in detailed dialogue with Ofwat to understand the difference and provide any additional evidence required to support the submission.

Highest ever level of renewable energy production

Commenting on its efforts to work at the lowest sustainable cost, United Utilities said  that its asset optimisation programme continued to provide the benefits of increased and more effective use of operational site management to optimise power and chemical use and the development of more combined heat and power assets to generate renewable energy.

On energy and carbon, United Utilities said it has plans in place to further increase its renewable energy production over the next few years. The recent completion of its innovative, £100m+ recycling and energy plant at its Davyhulme wastewater site  contributed to its highest ever renewable energy production in 2013/14 of 133 GWh. This represents c17% of the company’s total electricity consumption, up from c13% last year, helping it to avoid energy purchase costs of around £10 million, as well as attracting renewable incentives of around £5 million.

The firm is also implementing a more proactive approach to asset and network management, with the aim of improving its modelling and forecasting to enable it to address more asset and network problems before they affect customers and reduce the level of reactive work.

On energy and carbon, United Utilities said it has plans in place to further increase its renewable energy production over the next few years. The recent completion of its innovative, £100m+ recycling and energy plant at its Davyhulme wastewater site  contributed to its highest ever renewable energy production in 2013/14 of 133 GWh. This represents c17% of the company’s total electricity consumption, up from c13% last year, helping it to avoid energy purchase costs of around £10 million, as well as attracting renewable incentives of around £5 million