Pennon Group, the parent company of South West, Bristol and Bournemouth water companies, has said it will reinvest £20 million of outperformance in its WaterSharePlus scheme.
The scheme, which launched in 2020, gives billpayers the opportunity to have a £20 bill reduction or a share in the business.
It will now be extended to customers of Bristol Water following the completed acquisition of the water-only company by Pennon earlier this year.
The company first invested in the scheme in 2020, with one-in-16 customers opting to become shareholders.
The announcement was part of Pennon’s full year results for 2021/22, which saw revenue for the 12 months up by 6.7% year-on-year and EBITDA up 14.7% including contributions from the Bristol Water acquisition.
Davy told Utility Week the group will reinvest money from the £150 million outperformance accumulated so far in AMP7. This will include £82 million towards pre-funding the Green Recovery initiative Pennon has proposed to regulators, reinvesting to improve water quality in rivers and coasts as well as the £20 million contribution to WaterSharePlus.
She said: “We’re absolutely acutely aware of the cost of living crisis and we believe every customer should benefit from the work we do, so we’re focusing on three things. Firstly, making sure bills are as low as they can be by delivering efficiencies; secondly we have our affordability toolkit in place that is helping out more than 100,000 customers who find themselves with affordability issues; thirdly we are the only company to offer a scheme such as WaterShare.”
Environmental goals
The company is preparing to spend £82 million of accelerated green recovery funds in improving water quality around the region. This aims to ensure waters are fit to swim in year-round, not just the current May – September bathing season.
To do this, the group will invest in more than 200 of its assets and explore solutions to reduce the number of times storm overflows are triggered. Davy said this will be a combination of more traditional engineered approaches, such as expanding storm attenuation tanks, together with nature-based and catchment management solutions.
Green recovery spending includes pilot schemes that will be used to inform future plans and investment for AMP8 delivery.
The group has set a target to improve its Environment Agency environmental performance assessment (EPA) score to 4* by 2024.
“We are not a four-star company,” Davy said. “We’ve been one or two stars for the past 10 years, and now – rightly so – the bar is rising in terms of our performance.”
To reach this, Davy said there is a “very clear plan in place across the organisation.”
This is based on data gathered and analysed over the past 18 months from across all networks to understand where there may be issues or “pinchpoints on the assets” that could lead to an overflow or pollution incidents.
Davy said the group invested in 210 hotspots last year and has mapped assets at a catchment level to know where the pinchpoints are. It is next looking to roll out a combination of nature-based and hard-engineering interventions to alleviate these in the future.
“Yes, it seems like a long way to go from where we are now to get to 2024 but we absolutely have the teams focused on it and have spent the last 18 months knowing what we need to do, so we are in a good place for that.”
Integrating Bristol Water
Davy explained that in terms of operational performance and outcomes, Bristol has seen improvements in its metrics including supply interruptions driven down and strong customer service performance – ranking sixth out of 17 water companies for service.
While the branding and teams will remain in place in Bristol, there will be changes to drive efficiencies and learnings “We will be going through a process with Ofwat, as we did when we merged Bournemouth Water, and similarly we will be retaining the presence of brand and teams in Bristol. Supply chain efficiencies, systems and processes will be aligned across the group to drive performance. There are learnings from both sides – for C-Mex, the customer service measure, Bristol outperforms South West Water so there is plenty to learn from Bristol.”
Gearing
Since the acquisition of Bristol Water, Pennon’s Regulatory Capital Value (RCV) has stepped up to £4.2 billion, compared to a £2.6 billion net debt situation, which Paul Boote, finance director, said puts the group in sustainable gearing position.
After the sale of Viridor the group invested £100 million into the water businesses, which Boote said should bring gearing levels to 61.4% with further de-gearing anticipated over the AMP towards Ofwat’s notional 60%.