Utility Week

18 | 15TH - 21ST FEBRUARY 2019 | UTILITY WEEK Finance & Investment T he prospect of the equivalent of a "big six" in the water retail market took a step closer aer Scottish Water subsidi- ary Business Stream announced it was buy- ing the business customer base of Yorkshire Water Business Services and Three Sixty, both part of Kelda Water Group, for an undis- closed sum. The deal, which will take effect this sum- mer subject to approval by regulators, marks a significant milestone in Business Stream's plan to cement its position as one of the larg- est players in the market and to grow its cus- tomer base. Business Stream is currently the larg- est operator in the Scottish non-domestic water market, headquartered in Edinburgh with offices in Glasgow and Worthing, and employs more than 370 staff. The acquisi- tion will double its market share by adding around 140,000 customers for water and wastewater services in the Yorkshire area, making it the third-largest operator in the combined Anglo-Scottish market. Having cut its teeth when the Scottish water market deregulated in 2008, Business Stream acquired Southern Water's non- domestic business in 2016, adding around 105,000 non-domestic customers across Kent, Sussex, Hampshire and the Isle of Wight, just prior to deregulation of the Eng- lish non-domestic water market. Business Stream is on an upward trajectory, hav- ing more recently won UK-wide contracts with some major names including Greggs, Lloyds Banking Group, Morrisons, and Network Rail. The retailer's chief executive, Jo Dow, says the opening of the English retail water market in 2017 had created "huge opportuni- ties" for the business. "As we look ahead to the future, we recognise that scale will be an important factor, enabling us to deliver a more competitive service for our customers across the UK. "We will use the experience we gained from the Southern acquisition to ensure that the transition is seamless for our exist- ing and future customers, providing them with a market leading customer experience, and access to innovative services that reduce their costs, risks and environmental impact. As a specialist supplier, with over a decade of experience operating in a competitive water market, we know we are ideally placed to deliver these benefits for our customers," she adds. Water companies in England and Wales have effectively been regional monopolies since the industry was privatised in 1989. But deregulation of the English non-domestic market in April 2017 meant that 1.2 million businesses and public bodies in England were able to choose their water supplier for the first time, an option previously only available to the largest users. At the time of market opening, Yorkshire Water made no secret of its intention to exit the non-house- hold customer market, which it says wasn't aligned with its strategic direction. Liz Barber, Yorkshire Water's director of finance, regulation and markets says: "Busi- ness Stream has a strong track record of delivering excellent customer service and are very experienced in the market. We are confident that they will continue to provide customers with the same high level of service they have had from Yorkshire Water Business Services. We are working closely with Busi- ness Stream to deliver a smooth transition process for our customers. "All affected colleagues have been briefed and we'll be working with them throughout the transition process. We understand this will be an uncertain time for colleagues, but securing their ongoing employment is of the utmost importance to us and we have strong internal policies which support us in doing this." A number of key account managers will transfer to Business Stream as part of the deal. Ben Lind, strategies lead for utilities and energy at consultancy Hedgehog Lab argues it was clear that Kelda Group had been made an offer it couldn't refuse. "It's no coinci- dence that last week we saw Ofwat demand that water firms cut water bills further between 2020-25 and if suppliers on the non- domestic side are under the same pressure, then it could be that Business Stream's offer came at the perfect time for Yorkshire Water." Since the English market opened in April 2017, about 10 per cent of eligible customers have actively made a choice in the market – either by switching supplier, renegotiating with their existing supplier or simply explor- ing their options, according to a review pub- lished by Ofwat last summer. It found that non-household customers had seen about £8 million in bill savings collectively in the first year of the new market, as well as Are we a step closer to a 'water big six'? Does Business Stream's purchase of Yorkshire Water's business customers pave the way for further consolidation in the market? Rachel Willcox investigates. Analysis Jan 2016: Portsmouth Water says it will exit the business retail market when it opens. Castle Water buys. M&A in the water retail market Jan 2019: Business Stream snaps up Kelda Water Group's customers May 2018: Castle Water buys South East Water Choice Jun 2017: Castle Water buys Cobalt Water Mar 2017: Anglian Water Business and NWG Business join forces to create Wave Jul 2016: Thames Water to exit market. Castle Water buys. Jun 2016: Southern Water to exit market. Business Stream buys. Mar 2016: Severn Trent and United Utilities team up to Water Plus

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