Thames Water announces £11.7bn PR19 investment plan

The UK’s biggest water services provider has announced an £11.7 billion investment plan to improve infrastructure, service and efficiency as part of its PR19 plans.

Thames Water, which serves 15 million customers across London and the Thames Valley area, has submitted its five-year business plan to industry regulator Ofwat. The proposals include planning for a strategic reservoir for the south east region of England.

The plans, which cover the period 2020-25, include £2.1 billion to boost resilience and reduce leakage and follow engagement with nearly one million customers over the last three years.

In total 70 per cent of customers approved the final proposals, which contain plans for a four-fold increase in financial support for customers across the region who struggle to pay.

Modest distributions of around £20 million annually will be given to external shareholders while, Thames says, it prioritises investment in its network, with average household bills remaining flat before inflation. The plans will also increase Thames’ financial resilience, with gearing reduced to 76.2 per cent and the “equity buffer” increased to £4.7 billion.

Steve Robertson, chief executive, Thames Water, said: “Our responsibilities to the environment and customers are huge, and we will partner with them and our peers to insulate our region from the effects of changing climate patterns. This includes planning for a strategic reservoir for the south east region of England and exploring the potential of water transfers.

“Our proposals are ambitious, well-costed and widely-supported by our customers, who agree we should prioritise the most vulnerable. Bills will be flat in real terms over the five-year period and our shareholders will receive annual distributions of around £20 million as we prioritise investment on significantly improving service.”

The company says its plan will deliver an 18 per cent reduction in pollution incidents, cut leakage by 15 per cent and generate enough green energy to power 115,000 homes. It added its longer term ambition is to have zero pollutions, stop abstractions from vulnerable chalk streams and halve leakage.

An “innovative smart water network programme” will provide an enhanced level of insight in to Thames’ water systems, to allow teams to respond faster and more effectively to emerging operational issues. This data will also underpin the modernisation of Thames Water’s control environment, covering all areas of its operations.

Meanwhile more than 200,000 customers who find it hard to pay will receive discounts of up to 75 per cent and those in vulnerable situations will be further prioritised during operational incidents, with the priority services register increasing seven-fold to 400,000 people.

After 2020, management bonuses and dividends will be tied to meeting targets on reducing leakage and pollutions, and increased customer satisfaction.

Thames is also overhauling its corporate structure to make it easier to understand, and plans to lower operational unit costs by nearly 14 per cent.

A previous failure to meet its commitment to cut leaks resulted in the company agreeing to pay back £65 million to customers on top of £55 million of automatic penalties on 7 June.

The move followed an investigation by Ofwat, which found Thames Water’s board did not have “sufficient oversight and control” of the company’s leakage performance.

All water companies across England and Wales will submit their five-year business plans to Ofwat today (3 September) for the next price control period.

All companies must set out a detailed business plan, outlining how they will meet the needs of their customers from 2020 to 2025 and beyond.

There are four main themes in PR19: great customer service, affordable bills, resilience in the round and innovation.

Ofwat will scrutinise all the business plans before publishing an initial assessment of each company’s plan on 31 January 2019.