TIDMBA18
RNS Number : 3987O
Thames Water Utilities Finance PLC
02 October 2023
Thames Water plans record investment to turnaround performance
for customers, communities and the environment
2 October 2023
Thames Water Utilities Finance plc announces that Thames Water
has submitted its business plan for 2025-30 to Ofwat as part of
Price Review 2024 (PR24) following consultations with nearly 20,000
customers, the communities in which it operates and its wider
stakeholders.
Cathryn Ross and Alastair Cochran, Interim Co-CEOs of Thames
Water said:
"Our ambitious plan delivers what our customers have told us are
their top priorities. We plan GBP18.7 billion total expenditure -
including a record GBP4.7bn investment in our network and other
assets - to maintain safe high quality drinking water, to ensure
security of water supplies across London and the Thames Valley now
and in the future, and to deliver further environmental
improvements. Our plan prioritises storm overflows, bathing water
status and reducing leaks and pollutions. In parallel, we will do
more than ever to support customers by introducing an improved
social tariff for those who struggle to pay their bills."
Our plan will deliver a reliable, secure and affordable service
for customers by:
- Preserving a reliable supply of water, with minimal disruption
- Replacing 500km of ageing water mains
- Maintaining safe, high-quality drinking water by replacing 54,000 lead pipes
- Upgrading 150km of sewers to lower the risk of sewer collapses
- Reducing the number of times sewage floods into properties by
17% as well as all other external sewer floods by 14%
- Providing over 530,000 households meaningful support with their water bills
- Resolving more billing and operational issues within 24 hours
by improving digital infrastructure, allowing customers to resolve
more issues online
Our plan will create more jobs and enhance biodiversity for
communities by:
- Hiring more local people by increasing the number of T-levels,
summer internships and apprenticeships
- Investing GBP12 million in improving land to boost biodiversity
Our plan will further materially improve Thames Water's
environmental footprint by:
- Reducing storm overflows by 28%
- Reducing blockages caused by sewer misuse by 15%
- Reducing the total number of pollution incidents by 30%
- Opening the Thames Tideway Tunnel, London's "super sewer", the
third phase of improvements that will increase the health of the
river by reducing combined sewer overflows by c.95%
- Investing to improve the bathing water quality at Wolvercote Mill Stream
- Spending over GBP2.5bn to deliver a 22% reduction in leakage
- Reducing water use per person by 5.5%
- Continu ing our industry leading roll out of 1 million smart
meters to make it easier for customers to save money and find
leaks
- Ensuring water security for this and future generations,
including consulting and planning for a reservoir near Abingdon
- Replacing assets that come to the end of their life with carbon neutral alternatives
Our plan is financeable by:
- Delivering an GBP18.7 billion totex programme to maintain safe
high quality drinking water, ensure security of water supplies and
deliver further environmental improvements
- Offering sufficient returns for further shareholder funding of
GBP3.25 billion in AMP7 and AMP8, in addition to GBP0.5 billion
received in March 2023
- Proposing a Weighted Average Cost of Capital of 4.25% (real)
- Delivering c.30% real RCV growth over AMP8
- Targeting BBB+/Baa1 investment grade credit ratios
- Reducing average gearing to 71% and strengthening post
maintenance interest cover ratio to 2.1x
- Assuming no dividends are paid to our external shareholders during AMP8
Interim Co-CEO's Statement
We and our shareholders are fully committed to deliver a step
change in investment and performance. That is why, between 2025 and
2030, our plan proposes to invest a record GBP4.7bn in our network
and other assets, which will improve water security for our
customers in London and the Thames Valley and deliver environmental
improvements. This investment is critical to building greater
resilience in the face of an ageing asset base, climate change and
population growth. In doing so, we will more than double current
levels of investment.
For over three decades Thames Water's bills have been below the
industry average, despite us having the oldest network. And they
are no higher today than a decade ago. To deliver water security
and environmental improvements, our bills will need to rise but
also be affordable.
We are all too aware that we are asking customers to pay more at
a time when many are already facing financial pressure from
household bills rising across the board, but it is now vital to
fund future investment. We will therefore do more than ever to
support customers who struggle to pay their bills and our plan
proposes to provide over 530,000 households with meaningful support
with their water bills.
We also have choices about exactly how we recover the costs of
providing life's essential service over the next period. If we were
to adopt a 'rise and flat' bill profile during 2025-2030, the
average monthly bill will rise by GBP14.55. Alternatively, we could
introduce lower bill increases at the start of the next price
control period, but this would mean steeper rises over time. We are
looking forward to discussing the right bill profile for our
customers further in the coming months.
We are committed to doing our best to ensure that customers do
not pay more than they need to for this vital investment by
becoming a more agile, efficient, and responsive company. We will
also make sure we deliver performance improvements in the areas
that matter most to our customers. Our refocused, prioritised
three-year turnaround plan will build on what we have achieved over
the last two years and take us into the next period. It will
deliver a turnaround in performance and a more resilient Thames
Water.
Our shareholders are stepping up to support this much needed
investment, underscoring their commitment to delivering Thames'
turnaround and life's essential service for the benefit of our
customers, communities and the environment. Shareholders have
already invested GBP500 million of new funds in 2023. In addition,
they have agreed to provide a further GBP750 million in new equity
funding across AMP7. This further funding is subject to
satisfaction of certain conditions, including the preparation of a
business plan that underpins a more focused turnaround that
delivers targeted performance improvements for customers, the
environment and other stakeholders over the next three years and is
supported by appropriate regulatory arrangements. Our shareholders
have also acknowledged the need for additional equity investments
indicatively in the region of GBP2.5 billion in AMP8. In aggregate,
this would equate to total equity investment of GBP3.75 billion,
the largest equity support package ever proposed in the UK water
sector.
We will be hosting 'Your water, your say' meetings for customers
and other stakeholders in the coming months to gather feedback on
our plan. However, we simply cannot deliver everything that our
customers and stakeholders would like to see between now and 2030.
Our plan reflects the difficult choices we have had to make. We
take delivering our obligations very seriously. We also need to
deliver performance improvements in those areas that matter most to
our customers and stakeholders, whilst continuing to deliver our
turnaround and ensuring our infrastructure is more resilient for
the future.
We have had constructive discussions prior to submission with
our regulators on the scope of both our plan and proposed
regulatory arrangements, which include the scale of log-up to
CPIH-real RCV for totex overspend in AMP7, allowed totex relative
to actual spending in AMP8, and the maximum level of penalties that
we can incur under Ofwat's Outcome Delivery Incentive regime. We
are looking forward to continuing these discussions - which could
influence the scope of our plan, the bill impact and bill profile -
and securing a price control that, in the round, allows us to both
deliver record levels of investment for the benefit of the
customers, communities and environment we serve, and offer
investors an opportunity to earn the returns required to finance
it.
The link to a summary for customers of Thames Water's plan can
be found here
https://www.thameswater.co.uk/about-us/regulation/our-five-year-plan
. Investors should read this summary in conjunction with the full
plan to be published by Thames Water.
S
For investor enquiries please contact
David Gregg - Director of Corporate Finance
Sarah Davies - Head of Investor Relations
investor.relations@thameswater.co.uk
For media enquiries please contact
Suvra Jans
Head of Media Relations
07747 640 810
Suvra.jans@thameswater.co.uk
About Thames Water
Thames Water is the UK's biggest water and wastewater services
provider. Thames Water's key workers provide essential services
around the clock to 15 million customers across London, the Thames
Valley, and surrounding areas.
Thames Water provides 2.7 billion litres of drinking water and
safely removes 4.6 billion litres of wastewater every day.
Thames Water invested GBP1.8 billion in 2022/23, and Thames
Water will continue to spend wisely on improving resilience,
service, and efficiency, as well as provide more support for
customers in vulnerable circumstances.
Thames Water also has additional responsibilities to society and
the natural environment. What Thames Water does and how it does it
delivers significant public value, which is why Thames Water has
ambitious plans to self-generate more of its own power, reduce its
carbon emissions and increase biodiversity across its sites.
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END
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