Utility Week

24 | 8TH - 14TH NOVEMBER 2019 | UTILITY WEEK Operations & Assets Event Utility Week Congress, Birmingham, October 2019 T he recent convening of energy and water leaders at Utility Week Congress in Birmingham last month brought some strong industry messages about the rollercoaster year that was 2019, and what 2020 could now hold for utilities. And that was before the political bomb- shells that have seen Brexit delayed and Westminster announce that the country will go to the polls on 12 December. While we now know for sure there will be a Christmas general election, some of the thorny issues raised at Congress wait to greet the incoming government, whatever its political persuasion. And all will be waiting for answers. UK energy and environment policy; the potential shape of future regulation; the great gas versus electrification debate; smarter customer service and the increasing importance of a sustainable utility business model for the investor community in a net zero world; these all featured among the key talking points. Here, a selection of the event's guest speakers expand on some of those standout issues. Suzanne Heneghan, editor, Utility Week Industry rallies for change When industry gets together, the big issues come to the fore, as this year's Utility Week Congress revealed. Here some of the key thought leaders attending the annual event share their views in more detail. Sustainable business models have become investment game-changers for utilities, says Pennon's Susan Davy. I n the past, businesses saw a choice between making money on the one hand and "doing the right thing" on the other. It is now recognised that those businesses with sustain- able long-term models are the ones that succeed. Pennon Group is a large environmental infrastructure company focused on water and waste activities in the UK – our capital investment stretches over decades and to succeed we have to attract and retain customers and investors. Putting sustainability at the core of our business provided us with stability – financial, regula- tory and, we hope, our relation- ship with customers. Our environmental, social, and governance (ESG) objectives helped secure another early dra• determination from Ofwat, enabling us to move ahead with implementing our business plan, and allowed us to access the finance to deliver it sustainably. For a business such as ours that needs to plan decades ahead, that stability is invaluable. The environmental concerns of our customers are now matched by many investors, who are driven as much by a recogni- tion that companies with good sustainability standards deliver higher returns as conscience. The decisions we made around sustainability were therefore also about how finance is sourced to support our business. Our aim is to attract and retain equity investors – a third of the active market is ESG and 90 per cent of the largest asset manag- Investment Susan Davy Chief financial officer, Pennon The thorny issues raised at Congress will wait to greet the incoming government, whatever its political persuasion. ers have signed up to the United Nations principles for responsi- ble investment. Our Sustainable Financing Framework was the first in the UK and was launched last year. Finance costs are linked to ESG performance and our sustain- ability KPIs. We raised 75 per cent of our debt, over £600 million, from this source in the last financial year – and it led to us signing the UK's first green finance lease with HSBC. South West Water, our water business, is the only company to have its plans "fast tracked" by Ofwat two consecutive times. Our PR19 plan, in particular, was developed against a backdrop of changing customer expecta- tions, identified in our biggest consultation to date. Protecting our region's bathing and shell- fish waters was our customers' number two priority – second only to drinking water quality. ESG objectives must be effective, lasting, and have a real impact on how the busi- ness works. That is why we are putting forward a share owner- ship scheme for our household customers, called Watershare+, which is a first in the UK. This will help remove the remaining barriers between our customers and investors, with the aim of building a long-term relationship based on trust and legitimacy. For anyone not convinced of the case for sustainable and ethical investment –a Harvard Business School study found that firms that focus on material sustainability outperformed their peers by almost 5 per cent.

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