South East Water has today submitted its £1.9 billion AMP8 Business Plan for 2025-30 to Ofwat – the company’s most ambitious plan ever.

In a statement, the company describes the business plan as “the most important in its long history” because in the last few years, “it recognises that its service has not been of the high standard expected of it.”

South East Water said its operations and resilience have been under severe pressure since the pandemic and accelerated impact of climate change. Included is a significant investment into the network to improve customer service, reduce customer supply interruptions and strengthen network resilience.

Key elements of the plan include:

• A new reservoir at Broad Oak, near Canterbury – which is planned for completion by 2033.
• Commencing a smart meter roll out in AMP8 which will see 275,000 meters implemented, with the roll out completed by 2035.
• Implement a smart water network with a comprehensive roll out of additional meters, sensors, and loggers. This allows for dynamic management of the network to reduce leakage and improve resilience.
• Working with partners to improve the quality of raw water entering the catchments.
• Building three new nitrate treatment plants to address increasing nutrient levels in the raw water, that will breach nitrate trigger levels before catchment solutions are able to mitigate and reverse the trends seen.

David Hinton CEO: "we will need to raise significant new capital to fund this plan"

David Hinton, Chief Executive Officer said:

“The level of supply interruptions our customers have experienced has been too high. It has impacted on customer satisfaction and undermined the confidence that customers and stakeholders have in us to provide today’s public water service.

“We are proposing an ambitious level of investment, over the next five years we propose to invest almost £1.9 billion into the network to deliver a reliable and high-quality service for our customers, while also ensuring that the environment thrives.

“This plan will be a vital step forward for us by developing new water sources such as a reservoir at Broad Oak, increasing cleaned drinking water storage capacity, implementing smart meters, using new technology to help reduce leaks and continuing our work with farmers to maintain excellent water quality.

“It will mean that we will need to raise significant new capital to fund this plan, which we have assessed in line with guidance from Ofwat.

“While increasing bills is never welcome, investment in our water system is essential to ensure the security of our water supply in the future. Using the Ofwat investment methodology, we believe that delivery of this plan will see bills rise on average from £19.33 a month in 2025 to £23.12 a month by 2030. The funds raised are guaranteed only to fund improvements in our water systems and if these improvements aren’t delivered, bills will automatically be reduced.”

In the plan the company has significantly increased the support available for its vulnerable customers by developing a six-point plan of support including a new social tariff and additional help aimed at supporting those in water poverty by 2030. This will include nearly doubling the number of customers on the social tariff by 47,000 to a total of 104,000 customers, whilst also increasing the qualifying threshold by 17 per cent. It will also expand its partnerships to reach as many eligible people as possible.

The total expenditure of £1. 892 billion includes base core service expenditure and South East Water’s proposed enhancement plan.

Base wholesale capital maintenance expenditure includes:

• Boreholes – planned and capitalised repairs £13.99m
• Service reservoirs including repairs £21.82m
• Health and safety £2.63m
• River Medway Scheme (RMS) £0.25m
• MNI interventions £84.08m
• Discharge compliance improvements £9.65m
• Capitalised repairs £9.00m
• GAC replacement £1.5m
• M&G – IS infrastructure £16.31m
• M&G – Other £48.13m
• M&G capital overheads £26.05m
• M&G meter replacement £29.01m
• Distribution mains £70.62m
• Stop taps and apparatus £39.05m
• Statutory reservoir renewals £0.98m

Base wholesale capital maintenance expenditure totals £373.07 million.

Proposed total enhancement expenditure in £millions for 2025 to 2030 for company-wide schemes includes:

Water Resources - including demand management activities £180.392m

WINEP - eight schemes £8.880m including:

• Biodiversity gain company landholdings
• Flow rate monitoring for MCERTS certified WTW
• Pan area license capping no deterioration investigation
• Swift, swallow and martins investigation
•  INNS surveillance development and raw water transfer mitigation trials
• Company contribution to regional plan environmental destination

Resilience  - £49.921m including:

• Feasibilities and investigations
• Smart Water Networks
• Power Resilience

SEMD - £45.265m including:

• NIS directive (Cyber Security)
• Alternative water plan

Water Quality - £33.049m

• PFAs investigations
• Chlorate PCV reduction investigations
• Lead pipe replacement study and trials

Net Zero – Transport offset (Electrification of fleet) 8.207

Total proposed company-wide expenditure, pre-efficiency is £325.713 million.

Some 58 per cent, or £479.2 million of the enhancement programme is traditional network and treatment works, engineering schemes and engineering feasibilities. This is still an increase of 285 per cent compared to AMP7 and includes eight complex schemes, which is broadly similar to AMP7 . However, it also includes a direct procurement of Broad Oak, and the lead pipe trials and PLC replacement programme for the NIS directive compliance.

Environmental investigations and catchment work make up 11 per cent of the programme, which is 450 per cent higher than AMP7 and will require a significant ramp-up of the collaborative in-house delivery model established during AMP7.

"Concerns that the investment framework Ofwat set out may not be sufficient to attract and retain equity capital investors”

According to the utility, it will need to raise significant new capital to fund the plan, which has been assessed in line with guidance from Ofwat. The company said its plan limits the impact on customer bills in AMP8 by funding a significant proportion of the investment through raising capital from its lenders as well as from shareholders.

However, the plan points out that since Ofwat’s guidance was published “markets have changed significantly and there are also specific methodological issues in Ofwat’s guidance that need to be addressed.”

It goes on to warn:

“The risk landscape has substantially changed compared to previous business plan cycles. There are now a far wider range of options for investors to choose from, often with more attractive levels of risk and reward.

“We have concerns that the investment framework Ofwat set out, may not be sufficient to attract and retain equity capital investors.”

South East Water has also provided Ofwat with an alternative investment methodology, commenting:

“We believe (it) reflects a more realistic outlook and would be sufficient to attract new financing to fund the required significant new investment, whilst recognising the risks inherent in delivering the plan. Details of this alternative methodology are in our business plan.”

Under this approach customers would see a price increase in their bill from £19.33 a month in 2025 to £24.96 a month by 2030.