South West Water has been granted a licence expansion to cover the Isles of Scilly, which the company said will lead to infrastructure investment of around £40 million by 2030.
The water company made the announcement as parent company Pennon Group released its financial results today (25 May) for the year ended 31 March 2018.
The group reported a 2.9 per cent increase in revenue to £1.39 billion compared to 2016/17 and saw pre-tax profit rise by 3.5 per cent to £258.8 million.
Pennon’s total dividend increased by 7.3 per cent up to 38.59p per share as the company sounded a positive note on its “strong performance” across water and waste.
The licence expansion is subject to an amendment to the Water Act, which the Department for Environment Food and Rural Affairs (Defra) will need to put forward.
Ofwat is considering an application from South West Water to expand its licence area.
Services on the five islands are currently provided by a combination of the Council of the Isles of Scilly, the Duchy of Cornwall and the Tresco Estate.
A statement included with the financial results, said: “This transfer is at zero cost but will lead to investment of around £40 million by 2030 to bring the infrastructure up to the standards we would expect at South West Water and at the same time delivering RCV growth.
“Surveys indicate a willingness to pay for this investment. An increase in water quality, public health and security of supply will all be delivered along with targeted improvements of bathing waters to achieve increased standards, with an approach to cost assessment for PR19 agreed.”
The water company said it is on track with plans for PR19, which include proposals for more than £1 billion of investment between 2020 and 2025 to increase resilience.
“We are consulting on these plans as we conduct our largest ever customer engagement campaign, ‘Get into Water’, reaching out to our c.1 million household customers.”
Chris Loughlin, Pennon chief executive, said: “Pennon has delivered a strong performance this year across water and waste. As a British business providing vital services to our communities, we are committed to delivering for customers and shareholders. Thanks to ongoing cost savings at South West Water, average bills are lower today than they were nine years ago, while we continue to invest significantly in our treatment plants and distribution network.
“Since 2015 our unique ‘WaterShare’ policy has identified £79 million of financial performance benefits to share with customers and we have been delighted by the response to our customer engagement campaign ‘Get Into Water’, which sets out our plans for ever improving service and increasing investment in the next regulatory period 2020-2025.”
Susan Davy, chief financial officer at Pennon, told Utility Week South West Water is “very much outperforming its business plan year-on-year.”
She said: “Again for this year the company has been outperforming both in terms of services to customers and cost base.
“And the cost base is really important because that goes towards keeping bills as low as they can be, and we think that is a very important thing to do.
“Our pledge for this period to 2020 was to keep bill increases below inflation and we’re very much delivering on that.
“We’re delivering on our commitments on the water side and continue to invest for the benefit of customers.”
She said the company’s expansion to the Isles of Scilly will see it “look after the asset base there, delivering for customers on those Islands” in the coming years.
Loughlin added: “At Viridor the operating fleet of energy recovery facilities is performing well, transforming household waste into electricity and heat. Good progress is being made to bring Viridor’s remaining four energy recovery facilities in the portfolio on stream, with three in commissioning and the final facility under construction.”
Davy told Utility Week, South West Water’s core values around being “trusted, collaborative, responsible and progressive” are at the heart of Ofwat’s principles outlined in its recent reform agenda.
She said water companies need to “drive a better performance for customers” and where there is financial outperformance “you need to share that with customers.”