WET News

ALSO IN THIS ISSUE News: Industry takes action on skills crisis (P2) Onsite: MUS' groundbreaking smart water network project in Leeds (P8) Utility Week Live Special: Utilities in transition (P14-16) WET NEWS WATER AND EFFLUENT TREATMENT NEWS O at gets tough in PR19 assessments MARCH 2019 Volume 25 • Issue 3 Interserve rescue plan announced Laing O'Rourke upbeat on ture O fwat has signalled that it is time for change in the water sector after only three of the 17 business plans submitted for the 2020-25 period were given the green light. While Severn Trent, South West Water and United Utilities were marked 'fast track' and told their PR19 plans are ready to implement, the regulator said no company warranted 'exceptional' status, while Thames Water, Southern Water, A† nity Water and Hafren Dyfrdwy were all ordered to substantially rework and resubmit their submissions. The majority were marked 'slow track' and told more work is required before their plans can be implemented, with Ofwat chief executive Rachel Fletcher under- lining that all companies are expected to "deliver more for less for customers over the next Ž ve years". Ofwat senior director David Black added: "We have set a chal- lenging bar but we think it was absolutely right to do that. We do think that customers shouldn't be paying for inefficiency and these companies need to have a hard look at where they are." The assessments come at a time when the industry faces political pressure to show the private model delivers value for money. E n v i r o n m e n t S e c r e t a r y Michael Gove said that while he believes privatisation delivers the best outcomes for customers and the environment at the best price, companies would need to work "harder in the public inter- est, not just in the interest of shareholders", adding: "While Ofwat's initial assessment indi- cates that some companies are stepping up to this challenge, this is by no means the case for all." Former Ofwat boss Ian Byatt said it was right that the regulator is demanding more this time around. "Customers deserve better service and lower prices," Byatt said. "Prices, profits and divi- dends have been too high, ever since the soft price review of 2004, and need to be reduced." However, there is some con- cern in the industry that the attempts to drive down cost will come at the expense of the neces- sary investments. Thames, which sought to invest a record £11.7 billion across AMP7, has been told it must scale down its spending plans. I nterserve has agreed a rescue deal that could see it cut its debts from £600 million to around £275 million by issuing new shares. The outsourcing giant, which reŽ nanced its debt last year, has faced a di† cult period as it bat- tles squeezed margins and the impacts of disappointing waste- to-energy projects. It said the key commercial terms of its deleveraging plan had been agreed in principle with its lenders, bonding providers and the pension trustee but remained subject to approval by sharehold- ers. Under the plan, existing lenders will provide an additional £75 million of new liquidity, and the Ž rm will issue around £480 million in new shares. The new equity is expected to account for 97.5 per cent of the company's share capital, with existing shareholders to be given the option to claw back the £480 million through a fully pre-emp- tive open oŸ er. Interserve CEO Debbie White called it "a signiŽ cant step for- ward", adding: "The deleveraging plan will, alongside our 'Fit for Growth' transformation pro - gramme, place us in a strong position to deliver our strategy, be competitive in the marketplace and provide a secure future." L a i n g O ' R o u r k e h a s announced it made a loss of £46.5 million a¢ er tax for the year ending 31 March 2018 as it conŽ rmed its reŽ nancing deal had been completed. It agreed new banking facili- ties for its UK business until 2022 over the Christmas period and the arrangements were completed on 15 February. The company also conŽ rmed a third straight year of losses with the delayed publication of its accounts, but they fell from £60.6 million in 2017 and £219.9 million a year earlier. Group chief executive Ray O'Rourke said the company is on course to produce a proŽ t based on EBIT in its Europe Hub and an underlying proŽ t in its global operations, adding: "We met our key performance targets through a concerted effort across the company to increase our e† cien- cies and embrace innovation. "We see our success, in steps large and small, as a way to inspire conŽ dence and invest- ment in the construction sector at a time when our competitors and members of our supply chain are facing unprecedented obsta- cles. Laing O'Rourke's optimism for 2019 stems from £8.1 billion in high- quality secured and anticipated work globally." " I ' m c o n c e r n e d about how we can signiŽ - cantly increase resilience while spending less than we currently do – especially in the face of population growth and climate change," Thames chief executive Steve Robertson said in a column for WET News' sister publication Utility Week. "If we don't invest in our net- work, it simply will not be able to perform at the level it needs to in the future." If less money is available, a change of tack will likely be needed. "Companies are going to have to look at how they can deliver AMP7 diŸ erently," Keith Gardner, Black & Veatch's technical direc- tor for asset management, said. "There's deŽ nitely going to "Water companies, consultants and delivery organisations will need to update their methodologies – and possibly strategies – to make the outcomes model work" Paul Taylor, Stantec, P10-11 "It's fundamental to have fully optimised assets to be able to provide the right level of resilience" Veolia's Tony McKenna on the company's optimisation work for Anglian Water, P9 strategies – to make the outcomes model work" Stantec, P10-11 ¨ Only three water company plans make the grade as regulator demands more for less have to be a greater focus on asset stewardship and asset manage- ment, because the availability of capital to deploy is going to be squeezed signiŽ cantly." Richard Whale, water market director for Atkins, said water companies had "responded posi- tively" to Ofwat's demands but that the key is ensuring that they and their supply chains drive even higher levels of e† ciency through AMP7 services. "It's highly unlikely such e† - ciencies will be achieved by tak- ing a business as usual approach to service delivery and we antici- p a te o u r cl i e n t s to b e m o re demanding of AM P7 supply partners," Whale added. "As a consultant to water com- panies across England and Wales, we've fully recognised the need to promote the adoption of digital and BIM-based asset management tools and systems, AI, machine learning and system-led thinking to deliver more challenging regu- latory outcomes for less." On 11 April, dra¢ determina- tions for companies with fast track plans will be published, with the remainder to follow on 18 July. Final determinations will be published on 11 December. Veolia's Tony McKenna on optimisation work for Anglian Water, "Companies are going to have to look at how they can deliver AMP7 di" erently" Keith Gardner, Black & Veatch Modular, multi-parameter water quality monitors for networks. t. 0800 8046 062 www.atiuk.com WINNER of the IUG Innovation Award 2018 MetriNet_90x265_Wet News_Feb 19.indd 1 11/02/2019 23:29 SOCIAL VALUE The growing need for water contractors to show commitment to customers, communities and the environment (P5-7)

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