Q: What was the rationale behind the strategy review and the group restructure?
A: We have a strategy review process every year – and it is not surprising we’ve done it in more detail. This is the first year of this asset management plan period, Viridor is moving from investment to delivery phase with its energy recovery facilities and we have a new chairman – so it is a natural time for reflection.
Q: Is the restructure making steps towards bringing Viridor and South West Water closer?
A: Following the strategic review we did over the summer, we realised that there is more commonality between SWW and Viridor than we might have imagined and therefore synergistic benefits to be had. If you look at Veolia and Suez, for example, although they’re international, they are seen as water and waste companies, and nobody sees that combination as strange.
There are a lot of similarities between the two, so we see opportunities to drive value by bringing SWW and Viridor a little closer together. However, water is a regulated market, while Viridor is regulated by the Environment Agency, but not regulated economically, so we must not force them together too closely.
Q: What is new in the restructure and the updated strategy?
A: It isn’t a particularly new strategy, but there are some new nuances. There is more commonality between waste and water business than we gave ourselves credit for. The new strategy aims to capitalise on the group’s strengths and capabilities and is looking for opportunities to share best practice and synergistic benefits.
Increasingly we’re looking at strengthening the shared services within Pennon group: procurement, HR, IT, those sort of things. We will do this on a case-by-case basis but must not destroy what makes SWW and Viridor great companies.
Q: How do SWW/Pennon’s preparations for competition in the non-domestic water market, and for the potential domestic water market, fit into the restructure?
A: In terms of structure, companies have the option of doing some internal segregation or opting for full legal separation. Some companies, although not many, have gone for full legal separation. That’s the route we’ve decided to take, by bringing SWW and Bournemouth Water customers together and creating a legally separate non-household business. For household retail, that will remain a part of the combined SWW and Bournemouth Water business.