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Business Stream said it would consider further acquisitions to bolster its share of the UK water retail market, following the news that it will buy the business customers of exiting Southern Water.
Speaking exclusively to Utility Week, the Scottish retailer’s chief executive Johanna Dow said: “We’ve made no secret of our ambitions, that we want to grow the business, and we’ve always said that we were looking at joint venture, acquisition, or partnership.”
She added that the company’s primary focus is to bed in the acquisition of Southern Water’s customers.
“It is really important for us that we make sure that the experience for customers is as seamless as possible,” she said. “We want to focus on that initially, but I would never say never, anything is possible.
“We’re definitely very growth-focussed.”
Southern Water announced today that it would exit the market when it opens up to competition in April next year, becoming the second water company to do so, after Portsmouth Water made a similar announcement in January.
Business Stream will take on Southern Water’s 100,000-strong business customer base, as part of a deal agreed for an undisclosed amount.
Dow said the deal had been under discussion for almost 12 months, after Business Stream approached Southern Water. The retailer had conducted research which identified the incumbent water and sewerage company (WASC) as a suitable acquisition target.
Dow added that both the size of the WASC, and its location, were the main drivers for the contract.
“Although we’ve used this transaction to gain that immediate scale, we are also very much with an eye on medium to longer term growth. And the location will be important for that growth,” she said.
Read Utility Week’s Q&A with Johanna Dow here
The story so far
In January, Portsmouth became the first water company to reveal that it would exit the market. The water-only company (WOC) sold its business customer base to Scottish supplier Castle Water, which has subsequently applied to Ofwat for a water supply and sewerage licence and has set its sights on English market expansion.
A further six companies have applied for licences since Ofwat opened the application process for those wishing to provide retail services in the new market.
Business Stream, Cobalt Water and Clear Business Water have all submitted applications, along with Thames Water Commercial Services, Northumbrian Water Business, and Pennon Water Services.
Scottish suppliers such as new entrant Everflow have told Utility Week they are considering buying into the English market when it opens. And Veolia UK has also said it wants to grow its retail activities in the UK water market.
Incumbent English Water companies looking to stay have also begun preparations. Of the WASCs, all but Southern Water have said they plan to stay.
And of the WOCs, Affinity Water, Bristol Water, Essex and Suffolk Water, Sutton and East Surrey Water and Cholderton and District Water have all told Utility Week they plan to remain in the market, with South East Water and Cambridge/South Staffordshire Water refusing to comment.
United Utilities and Severn Trent announced at the beginning of March that they would team up to create a separate retail business to compete in the water market when it opens.
The Competition and Markets Authority has since cleared the proposed JV, which the companies have announced will be called Water Plus.
Amies-King told Utility Week the firm will be “agile and innovative” and bring in “fresh new ideas from the new people” being recruited.
She said Water Plus was planning to be a “winner in the market”, and wanted to be seen as the “go-to” company for business customers.
Read Utility Week’s Q&A with Sue Amies-King here
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