Welsh Water will spend £41 million replacing a faulty sewage treatment plant, upgrading four other sites and reducing the number of spills from sewer overflows in south west Wales.

The work is needed to address “significant compliance issues” identified by regulator Natural Resources Wales (NRW) at Cardigan.

The company will spend £20 million in the next asset management period (AMP8) to replace the sewage plant, which is located on the coast and lacks capacity to treat wastewater.

The company said saline intrusion has worsened with rising sea levels, which overwhelms the plant at high tides. The problem is more acute at Cardigan than anywhere else in its network.

Work to replace the Cardigan plant will begin in 2025 and is slated for completion by 2027. A temporary treatment plant installed at the site will process wastewater until the new asset is online.

The influx of seawater can trigger combined sewer overflows to discharge and efforts to mitigate the impact had limited efficacy, the company said. The new site will use moving bed bio-reactors treatment to reduce the severity of the saline intrusion.

Managing director of wastewater services at Welsh Steve Wilson explained the treatment process was chosen after extensive investigations.

He said: “Having considered how other companies and countries are tackling seawater intrusion into treatment works, which is becoming more common as sea levels rise due to climate change, we have identified that the only sustainable solution involves investing £20 million to replace Cardigan wastewater treatment works.”

The work will reduce the number of spills from the site into the estuary.

“This is a major investment, but having exhausted all other options to resolve this, we are determined to deliver this for Cardigan and the surrounding communities,” Wilson said.

Across the Teifi catchment, there are 33 treatment plants and 66 pumping stations. The company will dedicate a further £9 million before 2025 to upgrade Llanybydder (£3.5 million), Pencader (£2.8 million), Lampeter (£1.3 million) and Cwrtnewydd (£1.2 million).

The not-for-profit water company is working with NRW to mitigate problems caused by seawater hitting the treatment works.

Ann Weedy, operations manager at NRW said the “significant compliance issues” at Cardigan are “unresolvable” without building the new plant.

She said: “This is the kind of investment that we, and the public expects. The enforcement action we are taking at this site requires Welsh Water to commit to this programme of work during their next investment period and we will work with them to drive the improvements at this site that we all want to see.”

NWR together with Ofwat is investigating the severity and frequency of permit breaches at Cardigan and will use enforcement and sanctions as required.

Weedy added that NRW challenges companies to improve performance across all assets to ensure all permits are complied with. This includes tightening its regulation through a river taskforce and a £20 million investment by water companies to reduce the impact of overflows by prioritising high spillers.