Ofwat has launched a new consultation on its draft decision agreeing to Portsmouth Water’s request for significantly funding and revised delivery dates for the Havant Thicket Reservoir (project (HRT) which is being developed by the water company.

Image: artist's impression of completed reservoir

The cost has more than doubled according to the regulator – rising from £339 million in 2022 in November 2021 prices (or £365.6 million in 2022-23 prices) to £822.9 million in November 2021 prices (£915.2m in 2022-23 prices).

Porstmouth Water has also sought a change to the duration of the price control from 31 March 2030 to 31 March 2035.

In January 2022 Ofwat’s initial decision established a cost allowance of £339 million based on the project’s scope, costs and risks as then understood, alongside a package covering cost sharing, risk and incentives, and delivery milestones.

Originally expected to operate primarily as a summer-use asset, the reservoir was designed to store surplus water from Bedhampton Springs during winter periods with a deployable output of around 21 megalitres (Ml) per day during drier months to tackle water sup­ply issues for South­ern Water.

Portsmouth Water is seeking the increased funding following the proposed integration in 2024 by Southern Water of the HTR to incorporate a water recycling scheme linked to the reservoir. The Hampshire Water Transfer and Water Recycling (HWTWR) scheme involves constructing a water recycling plant to produce high-quality recycled water, which is transferred to the HTR for storage. Water would then be transferred from the HTR to Southern Water’s Otterbourne water supply works for treatment and distribution

To enable  the integrated system to operate, Southern Water has asked Portsmouth Water to modify the original reservoir design to help meet Southern Water’s forecast supply-demand deficit in the region.

Integrating the two projects fundamentally changes how the HTR will operate and deliver the Enhanced HTR Project. The combined system will result in a five-fold increase in the deployable output of the HTR to around 111 megalitres per day, under certain conditions, and enable it to operate as a year-round strategic water resource, rather than as a summer-use-only asset. This includes additional infrastructure – the Alignment Works to connect the Enhanced HTR to Southern Water’s system and support the revised operating model.

Ofwat said that in addition to the Alignment Works, “unforeseen ground conditions” were identified during early construction in Autumn 2023, including extensive shear planes and sand formations, which required a redesign of the Enhanced HTR embankment.

"Project is now larger, more complex and expected to take longer to deliver than assumed at PR19"

Image: Havant Thicket Reservoir original construction and delivery timeline

Ofwat’s consultation paper states:

“This has had a material impact on both project costs and delivery timelines…Taken together, these developments mean that the project is now larger, more complex and expected to take longer to deliver than assumed at PR19”.

The main changes include:

• a dual pipeline solution between the Enhanced HTR and Bedhampton – initially, this was a single bi-directional pipeline
• a larger reservoir inlet pipe
• modifications to Bedhampton pumping station
• changes to the mixing and control systems,
• additional security requirements
• and a revised treatment solution at Farlington Water Treatment Works.

The key drivers of delay include:

• the redesign of the Enhanced HTR Project embankment following the identification of unforeseen ground conditions;
• the additional design, planning and delivery requirements associated with the Alignment Works;
• the need to undertake a planning application for elements of the revised scheme;
• constraints associated with earthworks, including seasonal weather restrictions and the increased volume of material to be moved; and
• the increased complexity of interfaces between Portsmouth Water and Southern Water assets.

Ofwat has proposed resetting the ODI delivery dates to reflect the updated programme as follows:

• July 2031 for dry commissioning - original date September 2026
• June 2034 for wet commissioning.- original date June 2029

Portsmouth Water’s second cost adjustment mechanism (CAM2) application is seeking £509.6 million of additional funding to transform the HTR from a 21 Ml/day summer-use-only asset into a 111 Ml/day regional water resource. Combined with the existing CAM1 allowance of £339.0 million, this results in a total project cost (CAM1 plus CAM2) of £848.7 million in November 2021 prices, (£915.2 million in 2022-23 prices).

Table source Ofwat consultation paper

At a headline level, Portsmouth Water’s application includes costs associated with:

• the Alignment Works required to integrate the HTR with Southern Water’s Hampshire Water Transfer and Water Recycling scheme;
• the redesign required to address ground conditions, including addressing the unforeseen shear planes and sand formations, which require a redesign of the Enhanced HTR embankment;
• the Farlington to Nelson pipeline, reflecting the development of this element of the scheme as design has progressed; and
• client delivery costs (project management office, PMO), non-construction costs and risk allowances associated with managing a larger and more complex project.

In total (CAM1 plus CAM2), Portsmouth Water has requested £848.68 million for the project in its final CAM2 submission. Ofwat’s draft decision allows a total project cost of £822.9 million in November 2021 prices - £25.8 million below the final cost-change submission.

Ofwat is now consulting on its proposed CAM2 decisions - in particular, the regulator is seeking views on:

• the cost allowance for the additional scope within CAM2;
• the treatment of risk and incentives, including how risk is shared between Portsmouth Water and Southern Water (and ultimately Southern Water customers);
• changes to outcome delivery incentives (ODIs), including updated delivery dates; and
• adjustments to the project's price control, including its duration and implementation arrangements.

"Draft decision should not be taken as indicating final decision"

As at PR19, allowed revenues for the Havant Thicket price control remain set to zero during the construction period. This reflects that Portsmouth Water’s customers are not funding the development of the reservoir through their bills, and that economic profits will only be realised once the asset is operational and bulk supplies to Southern Water commence.

Ofwat is pointing out that the draft decision is published on the basis of information currently available and should not be taken as indicating its final decision, which the regulator expects to make by mid December 2026.

A separate process is required to enable Southern Water to recover the associated funding from its customers. Southern Water has therefore submitted a request through Ofwat’s 2026 cost change process to adjust its allowed revenues. The final CAM2 determination will provide the basis for the assessment by establishing the allowed totex, which will be used to calculate the additional revenue Southern Water can collect during the PR24 period (April 2025 to March 2030) and, on an indicative basis, during AMP9 (April 2030 to March 2035).

Alongside the consultation, Portsmouth Water and Southern Water are continuing discussions on updated bulk supply arrangements for the Enhanced Havant Thicket Reservoir project.

Ofwat expects the companies to reach agreement on draft heads of terms that provide appropriate clarity on key matters, including:

• the operation of the reservoir, incentives and contractual arrangements between the parties,
• the treatment of liquidated damages and termination provisions reflecting the revised project scope and costs.

Ofwat is now seeking views from all stakeholders on its draft decision. Comments and representations should be sent to the Major Projects Team by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it with the title "Response to Havant Thicket CAM2 draft decision" by close of business on 12 October 2026.

Click here to download the consultation paper