Thames Water expects its performance around pollution incidents to get worse before improving after incidents rose by almost 20% in the six months to 30 September.
The company said regulatory changes to definitions of pollution are likely to increase the overall number of incidents it reports, regardless of any changes it makes to mitigate impact.
Overall, Thames’ environmental performance deteriorated in the first half of 2023-24 with an increase from 217 to 257 of category 1-3 pollution incidents.
However, the UK’s largest water company did see a 5% reduction in blockages, which cause 40% of network pollutions.
The environmental figures are contained within Thames’ interim financial results for the six months to 30 September, which show profits have halved while debts rose by £780 million to £14.7 billion.
The company’s interim co-chief executives Alastair Cochran and Cathryn Ross confirmed the company has developed a new “refocused” turnaround plan focusing on six areas of the organisation, including pollution.
The new plan, previously reported in Utility Week, shifts from an eight-year vision set by former chief executive Sarah Bentley, to a three-year “springboard” for its £18.7 billion 2025-30 business plan submitted to Ofwat in October.
The co-chief executives said the organisation undertook a “structured and rigorous process” to create “a refocused” three-year plan to overhaul operational priorities. The areas highlighted for improvement were health and safety, customer complaints, water quality, leakage, supply interruptions, and pollutions.
In a joint statement, Cochran and Ross added that the plan is “based on a resolute focus on understanding root cause issues and prioritising key outcomes.” It will build on work undertaken in the past two years by Bentley to improve basic operational performance and bring capital delivery as well as customer service back in-house.
During the first half of the year, gearing rose from 77.4% to 79.5%, which the company said was owing to the debt-funded portion of its new investment. The level remains below the 85% lock-up level and under its maximum allowed covenant of 95%, but well above the 60% level of notional gearing set by Ofwat for 2020-25. The regulator’s methodology for PR24 indicated notional gearing of 55% for 2025-30.
Its profits before tax fell 54% year on year from £536 million to £246 million despite revenue creeping up 12% to £1.3 billion.
The company said the significant decline in pre-tax profits was due to “interest rates, inflation and foreign exchange rates, together with cash settlements during the period”.
Progress was made to cut the backlog of customer complaints by 49%, however total complaints rose 13%. Elsewhere improvements were made on leakage, down 6%, and supply interruptions down 60%.
Thames’ auditors, PriceWaterhouseCoopers, had warned of “material uncertainty” around the company’s future because it had no firm arrangement to refinance a £190 million loan, as reported by The Telegraph at the weekend.
During H1, Thames invested £1 billion in its asset base including £303 million on capital projects. A further £125 million was spent to address network leakage and trunk supplies; £77 million on upgrades; £16 million connecting the sewer network to the new Thames Tideway; and £46 million on metering.
Last week, Cathryn Ross said the company had ramped up its capital expenditure programme, which was £241 million up from the previous year for the six months to September.
Ross admitted Thames’ schedule of work for the current asset management period (AMP7) began too slowly to meet the commitments the company made at PR19. Consequently, some performance targets will need to be pushed into AMP8 or beyond.