Utility Week

UTILITY WEEK | 16TH - 22ND NOVEMBER 2018 | 9 Interview T here's a steely determination about John Reynolds; once his mind was made up to enter the English water retail market, there was no stopping him. As a member of the Water Industry Commission for Scotland (Wics) prior to the announcement by the Depart- ment for Environment, Food and Rural Affairs (Defra) to deregulate the English retail market, he realised the focus in Scotland was "very much" on the price controls being developed at the time rather than the market itself. "I was concerned that the market wasn't working efficiently," he tells Utility Week when we meet at one of Castle Water's offices north of the border in Blairgowrie. "There were large groups of customers who were missed out of the market that didn't see the benefits. There were also some of the bad practices that had been seen in the early days of electricity and gas – particularly around effectively doorstep selling to small businesses," he says. Reynolds explains these issues were becoming "prevalent" and when Defra announced plans for the water market in England it prompted him to have a "not wholly serious" discussion with Wics chief executive Alan Sutherland about competing in the market. The two mulled over whether the best way to make sure the English market worked was to be "involved in regulation" or to compete. "I ultimately decided that the much more interesting thing to do rather than take an involvement in regulating the English market was to compete in it," Reynolds recalls. And so Castle Water was founded in 2014 as the deci- sion was made "very quickly" following the Water Bill being signed into law. "There were only three years until market opening. In terms of establishing business systems, marketing expertise, sales expertise and transactioning processing expertise from scratch, that wasn't very long – particu- larly given we knew we had to be ready for the market a year beforehand. "I went from playing around with the idea to submit- ting a licence application probably in about the space of a week. If I was going to do it, I had to do it thoroughly and fast." And he meant business from the off. "We said early on that our target was to have over 10 per cent of the market in England in the first year. People who knew me took that seriously." The company entered the market with about a 20 per cent share on day one. It wasn't long before other people started to take him seriously too, as Castle Water acquired the business cus- tomers of Portsmouth Water when the latter became the first English incumbent to announce it would exit the market. In 2017, Castle Water also took over the business customers of Thames Water. The company has since gone a step further by acquir- ing fellow non-domestic water retailer Cobalt Water and then more recently Invicta Water for an undisclosed sum. Invicta traded as Water Choice in the market and the deal saw 50,000 business customers in South East Water's service area transfer to Castle Water. Rapid acquisitive growth seems to have had a positive impact on the company's finances. Accounts published in January this year show it made a profit of £1.05 million up to March 2017 – a dramatic step up from the £730,000 loss it made the previous year. Reynolds won't be drawn on whether the company currently has its eye on any other retailers, though. "We will continue to evaluate things in the market," he says. The company describes itself as the leading inde- pendent water retailer in the UK and supplies hundreds of thousands of businesses, charities and public bodies throughout England and Scotland. In November last year, Castle Water secured a national public sector contract in England through the Crown Commercial Service (CCS) framework, worth an estimated £28.9 million. It is continuing its growth trajec- tory and in the past couple of weeks announced it had won a second multi-million pound public sector contract through the CCS framework. Reynolds says he set up Castle Water to be "a bit dif- ferent". He wanted to provide an alternative to the choice customers had of either "rather stodgy subsidiaries of the old vertically integrated companies" or those with very different looking sales propositions which custom- ers could respond to but that came from companies "without much financial substance". "Generally, customers of a utility want to know that the service they are getting is backed by something sub- stantive," he says. His career background puts him in good stead to appreciate the importance of financial backing, with senior positions in investment banking covering equity research, mergers and acquisitions and principal investment. "Castle Water was set up to have the type of scale associated with the larger players in the market – so the subsidiaries of the likes of Severn Trent and Thames – and at the same time have the cost base, mindset and independence. And when I say mindset what I mean is developing a sales proposition and a platform in terms of service that customers actually wanted rather than opted for by default," he says. Reynolds takes pride in leading the way by doing things "first". "People started to take us seriously when we announced the Portsmouth acquisition. Although it was small it was the first acquisition of customers. One thing about Castle Water is a lot of the things we have done, we have done first. We did the first Affinity Part- nership, we had the first transfer of English customers.

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