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United Utilities (UU) is facing a higher than expected bill of £25 million as a result of the cryptosporidium parasite contamination that afflicted its Franklaw water treatment works throughout August.
Initial estimates put the compensation costs for the 300,000 customers that faced a boil water notice at between £15 million and £20 million, but in a trading update on Wednesday morning, UU says the final compensation and one-off cost bill is expected to be higher than originally anticipated.
The compensation pay out, including to businesses that are claiming loss of earnings, is expected to be completed by the end of September.
UU said it was “very disappointed” with the water quality incident, which could be subject to a parliamentary inquiry as well as an investigation from the Drinking Water Inspectorate (DWI), which could result in a fine.
The company said it deployed additional resources, including UV treatment rigs, to restore the water quality “as quickly as possible”. It took a month from when traces of the parasite were discovered to when the boil water notice was fully lifted.
The company also said in the half year update for 2015/16 that it faced additional costs of £5 million relating to the opening of the retail market in 2017.
Despite these additional costs, the update said the company was trading in line with expectations for the first half of the year and that revenue is due to be in line with that from the first half of last year.
Profit is predicted to be slightly down, but again is in line with expectations as a result of the new price control, which came into effect from 1 April.
UU has also made a strong start to its AMP6 investment programme, investing £800 million in capital projects, ahead of a predicted £720 million for the period.
Revenue is expected to be similar for H1 2015/16 as it was for the first half of the last financial year, with lower regulated revenues being offset by higher non-regulated sales.
UU will announce its half year results on 25 November 2015.
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