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South West Water is charging ahead with adding water resources across its region with a new reservoir coming online within days and multiple desalination plants planned for as early as next year.
The company will commit £75 million of new investment towards securing water resilience over the next two years, including the transformation of a disused clay pit into a reservoir at Bodmin Moor in Cornwall. The company bought the Hawks Tor site earlier this year and expects to start abstracting up to eight million litres daily within the coming days. The reservoir will be used to increase water supply to customers and also to refill the Collingford Reservoir, which remains at just 24% of capacity.
Other sources will include re-purposing ex-quarries and mines as well as a second reservoir in the Bristol region as part of longer-term plans.
Chief executive Susan Davy told Utility Week eight or nine locations were being assessed in Cornwall to house desalination plants and the company anticipated several to be included in its plans to expand water sources for the south west of England.
Davy pointed out the company has had a desalination plant within its asset estate since adding the Isles of Scilly to its group. A plant has operated on St Mary’s since the 1990s as Britain’s first mains supply from seawater.
“They are small scale reverse osmosis plants we are putting on sites. We have experience of this as we have one on the Isles of Scilly so it’s not new technology for us,” Davy said. “We think these will be useful and we have eight or nine sites we are looking at across Cornwall where we will be able to plug and play these plants for use next year.”
She said there would be “a number of them, as well as opportunities for quarries and ex-mines.” Davy added it would not have been possible to progress at pace without support from regulators to bolster water supplies.
South West Water announced £45 million of new investment alongside parent company Pennon’s H1 update for 2022/23 for the six months to 30 September. The new funds mean a total of £75 million will be focused on water resources for the region, which Davy said was funded by returns on regulated equity performance.
“As a business we have a very efficient balance sheet and financing in place with financing outperformance and Totex outperformance so our returns are higher,” she explained. “We always said we would deliver double base returns, which are around 7.8%, ours are higher than that and we are reinvesting.”
The £75 million includes up to £10 million financial incentives for customers through the new Stop the Drop initiative to encourage efficiency in areas with lowest reserves.
“We launched Stop the Drop as a short terms scheme to ask customers to use less water; they will save money by using less but we are also going to give them £30 off bills if reservoir levels increase.”
She said levels are rising and the company anticipates getting to where it needs to be by the end of the year. The householder response to the incentive plan has been “more marked” than the hosepipe ban, Davy said.
“The carrot not the stick has been helpful here. Incentivising with money off of bills has encouraged behaviours we want to see.”
It is the first scheme of its kind in the sector and the response, Davy explained, would bring evidence for repeating in the future.
Pennon’s results included gearing lowered to below Ofwat’s notional 60%, which chief financial officer Paul Boote told Utility Week lowering gearing to 59.4% had been achieved ahead of the group’s target of 2025.
He said: “With inflation being where it is it has created a different profile of a journey to get to that point but we are very much where we want to be and expect to remain.”
The organisation will repeat its WaterShare Plus for all customers, including Bristol Water’s, by offering billpayers £20 off of their bill or a share in the company. Two years ago, Davy said, the opportunity to have a stake in the business was popular but recognised this year people may prefer to pay less.
Following the acquisition of Bristol Water, Pennon anticipates the integration of the businesses to be completed in the new year. Mel Karam, chief executive, will step down from Bristol at that point.
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