Anglian alters totex to meet PR19 challenges

Anglian Water has made changes to its total expenditure and is testing a new funding model to find the efficiencies demanded by Ofwat in the PR19 draft determinations.

The water company said it will trial Direct Procurement for Customers, as suggested by Ofwat, to fund its plans for a new treatment works.

In the company’s half year preliminary results to 30 September chief executive Peter Simpson said: “We passionately believe that our plan is the right one to safeguard the future of our region and enable it to flourish. However, it is not financeable based on Ofwat’s Draft Determination, as we stated in our formal response in August.”

By changing its totex plans and accepting the Direct Procurement funding model the company has made changes that will lower bills by 1.1 per cent over the coming five years.

Simpson said: “We continue to work with Ofwat in the run up to Final Determination, to be issued later this month, and hope to reach an outcome which will meet the needs of our customers and the environment.”

Meanwhile, the company’s underlying profit before tax fell by £1.6 million to £36.7 million for the six-month period while group loss before tax for the period was down £229.2 million from a profit of £94.6 million.

The company said the decrease reflected reinvestment in proactive leakage maintenance, increases in below-ground infrastructure repairs and inflationary pressure on costs, partially mitigated by savings from efficiency initiatives.

No interim dividend was proposed, consistent with the previous year, as part of Anglian’s commitment to reduce gearing.

Since 2017 the company has funded 850 capital investment projects through its Green Bonds scheme. Financing from the bonds totals £811 million as it prepares for its sixth draw down in 2020.

The company said investments made through the Green Bonds issued to date are expected to save or avoid 160,736 tonnes of carbon – a 61 per cent reduction from the company’s 2010 capital carbon baseline.

The company was the first in the sector to embed public interest into its Articles of Association, something Ofwat has said it is considering making a mandatory requirement.

Projects funded by the Green Bonds must contribute to five environmental objectives: climate change mitigation; climate change adaptation; natural resource conservation; biodiversity conservation; and pollution prevention and control.

Chief financial officer, Steve Buck, said, “We made history in 2017 when we became the first ever public utility to launch a Sterling Green Bond, and we are very proud that all our capital activity meets the strict environmental criteria set for Green Bond investment. Sustainability is simply how we do business, all day, every day.”

Schemes the company has selected to fund with Green Bond investment include innovative water abstraction technology, drought and flood resilience schemes, and progressive water recycling and water resource management projects in its region.

The initial £250 million bond from 2017 will mature in August 2025 with a return to investors of 1.625 per cent. Anglian Water’s green bond framework was independently reviewed by DNV GL.