Pennon Group, the parent company of the South West, Bournemouth and now Bristol water companies, has said it is looking to increase its renewable generation capacity “as fast as possible” in response to the current high power prices and the geopolitical environment.
Speaking to investors as part of a trading update, chief executive Susan Davy and chief financial officer Paul Boote set out the organisation’s plans to increase renewable generation and address combined sewer overflows (CSOs) as well as discussing its recent acquisition of Bristol Water.
The company said it will accelerate £150 million of additional spending over its baseline plans for the current regulatory period that will be funded from outperformance earnings during the first two years. This will include £45 million of additional cash for the last three years of AMP7 to 2025 as well as previously announced green recovery funding.
Power
The first strand of the organisation’s net zero strategy is to make operations as efficient as possible to reduce energy consumption. “The more we can do to minimise our own use the better for the environment and the costs,” Boote said.
He explained this is “right up there in terms of priority” and will accompanied by an increase in the company’s own renewable generation. The net zero plan includes a target of self-generating 50% of its power by 2030, which Boote said the company is “keen to do that as fast as we possibly can, particularly in this financial environment for power prices”.
Work is underway on the first phase of a rollout of solar PV. Boote said the company is “actively pursuing” opportunities to increase and accelerate this deployment “wherever we can”.
He continued: “We will certainly be looking to increase the investments we put in place. It’s just a case of finding the opportunities and accelerating them. Looking at renewables particularly in the current environment with power prices, the economics are quite compelling. Commercially it makes sense to do that, so we will be looking to do more as soon as we can.”
Prior to the sale of its Viridor waste management business, Pennon was a net exporter of power three to four years ago, but is now a consumer. At present, South West Water now self-generates less than 10% of its power, Boote explained.
During the coming financial year 2022-23, the company plans to “effectively double that”, he said, adding that it plans “to go beyond that” with a mixture of solar, wind and hydro power schemes being considered.
He said the geopolitical situation will likely lead to a larger call for renewables, which may mean schemes that were not palatable in the past are now acceptable. Boote said the company hopes to “capitalise on that in the not too distant future”.
CSOs
In light of the requirements in the Environment Act, Pennon launched a customer consultation and is awaiting feedback about “how far and how fast we need to go”, Davy said.
She said: “We are making investment over the next three years to understand the issue and to intervene on 200 assets to substantially reduce or eliminate spills in the future.”
The cost of the work is yet to be determined as the solutions will be “very catchment specific” but could include additional storm storage, increased management across the catchment and even separating sewers depending on the situation in different parts of the region.
Davy said this means it is therefore difficult to put a specific cost on the work required.
“There are plenty of numbers out there ranging up to £600 billion but I’m not sure there really is the robust work that’s gone into those predictions,” Davy explained. She said the sector needs to calculate such costs to feed into the next price review.
She explained South West had some “ready to deploy” solutions that, if successful, may be rolled out during the next AMP period but stressed that different approaches would be required for each catchment.
Bristol Water and further acquisitions
On the integration of Bristol Water into the group, Davy explained that at future price controls the company will have “one business plan, one balance sheet”, but that Bristol will retain a separate price control. She compared this to the separate controls for water and wastewater the company currently works to.
Davy added that the group’s attitude to further acquisitions remains unchanged and it would pursue consolidation in the sector where it looked beneficial for customers: “We will continue to look for opportunities but we’re not on a time clock – if we see an opportunity we will seek investor support.”