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Pennon is adding novel water resources to boost supplies in the south west by up to 45% by 2025 through a combination of repurposed quarries and a desalination plant due to come online this year.
While unveiling its annual results, the company also outlined a ramping up of investment to minimise the risk of harm from sewer overflows, address affordability and enhance resilience against climate change.
Drought resilience
Chief executive Susan Davy explained the company’s ambition to bolster resources came in response to the region remaining in drought, highlighting the urgent need for novel resources and infrastructure.
Davy said the company will increase available resources in Cornwall by 45% and 30% in Devon by 2025 through a blend of repurposing quarries to be used as reservoirs, which the company began last year, as well as a desalination plant.
A modular, scalable desalination plant will come online in 2023/24 at the village of Par in Cornwall, just east of St Austell. Two sites had been considered, however the company will focus on getting one online first.
Falling profits
The company reported an 88% decrease in pre-tax profits for 2022/23, falling from £143.5 million to £16.8 million. That is despite a 4% increase in revenue, up from £792.3 million to £825 million. This is against a backdrop of a 50% increase to investment programmes. Pennon plans to spend £350 million over the coming year as part of its total £1.5 billion spend for AMP7.
Paul Boote, chief financial officer, said higher interest charges on interest-linked debt and energy prices have caused the reduction in pre-tax profits this year.
He anticipated inflation to impact on revenues in future years.
The company will spend £160 million on renewable generation and has secured a site in Dunfermline to generate 40GWh of renewable energy through Pennon Power Ltd. Davy said the company was in “advanced discussions” for a further four locations with an ambition for a power portfolio of 190GWh with energy storage capacity of 60MW. When these assets are in place it will equate to around 45% of energy requirements for the group.
Engagement and reputation
“We can only rebuild trust and make it clear where we are as a company through our actions and what we’re doing,” Davy told Utility Week.
She explained the company had ramped up community engagement at town halls, with parish councils as well as online information about work underway to improve beaches and waterways. This work includes significant reductions in pollution incidents with an ambition to halve releases from overflows by 2025 – initially focusing efforts on coastal locations.
Davy said: “There will always be times things go wrong in our systems, but we are working to mitigate those risks.” She stressed that “one spill is always one too many”.
She said talking to customers at sessions such as Your Water Your Say, which more than 1,000 people registered for, helped shift public perceptions. “We’ve got 3,000 colleagues across the business who are doing an enormous amount to look after communities. When people hear and see our colleagues talking about that , you can’t help to be inspired by these people who are working day in day out to do what they need to do for those communities.”
PR24
The company is developing its business plans for PR24, which will prioritise beaches and protecting waterways. Sustainable and nature-based solutions will be central to the company’s efforts for the next five year period.
Its leakage reduction target for the period will be 15% while also rolling out 500,000 smart meters to help customers use water responsibly.
It will upgrade 90 wastewater treatment sites to ensure compliance with tighter regulations as well major upgrades to 16 drinking water treatment works.
Building on work begun this AMP, the company will continue to add new water resources, which will include a reservoir at Cheddar that is part of the RAPID process.
It is targeting increasing renewable energy generation in the next AMP to 50% of the company’s consumption.
Live inquiries
Of the two ongoing investigations the company is subject to, Davy said it was “no surprise” given that the sector is in the spotlight.
The company has provided open and transparent information to regulators on wastewater treatment works and leakage investigations, Davy said.
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