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Water company boards have been warned that the quality of their PR24 business plans must be higher than those submitted in 2019 to meet the scale of challenge being faced.
Iain Coucher has piled pressure on companies to get their plans for 2025-30 right the first time around, after criticising the calibre of cost adjustment claims included in PR19 submissions.
Companies are writing business plans now to deliver to Ofwat in October, for which investment is anticipated to be many times greater than 2020-25 to meet environmental needs, regulatory requirements and societal expectations.
Coucher told non-executive directors from the sector to examine how they oversee and govern work. He said: “If the future is different, and it will be very different, what will have to change in their governance frameworks? How can board assure themselves, as a company, they are complying with and will continue to comply with all legal, regulatory and environmental obligations?”
With bills set to rise to pay to cover the additional investment, Coucher said plans must be “of the highest possible quality” to deliver what is required and urged NEDs to make sure PR24 submissions were of better quality than those drawn up for the previous asset manage period (AMP7).
“There is significant upsides, and downsides, attached to the quality of business plan submissions. So if people want better returns, then make sure that bids are of the highest quality,” Coucher said.
He made a plea that boards ensure business plans are affordable and deliverable, while making sure that investment can be secured and the right team is in place to deliver the programme of work.
“If you are not having conversations about the complete transformation of the company to deliver the investment programme for AMPs 8, 9 and beyond, then it is possible you and the executive teams have underestimated the scale of the challenge ahead.”
He said regulators would likewise need to change, and said Ofwat had begun by expanding its skill sets and reorganising itself to become a more active regulator and more demanding in ensuring excellence in operational delivery and project execution.
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