WET News

4 Leaders 2014 The LeADeRS 2014 Optimism materialises with AMP6 around the corner Early contractor involvement and transition investment result in busy order books for contractors as the industry manoeuvres through the last few months of AMP5 regulatory cycle second with a turnover of just under £4B, while Morgan Sindall is third with £2.04B. The turnover for all the contractors combined, where we have the figures, is £23.3B, more than £2B more than we reported in last year's The leaders. Traditionally, the last year of the five- yearly regulatory cycle has marked a downturn for the water industry's contractors and supply chain. This was made worse in the last 12 months of AMP4 as the economic recession took hold. This time around, the story appears to be different with a number of contractors reporting a busy time in the coming months, and with several water companies having put early contractor involvement policies in place. As a result, contractors are reporting busy order books with contracts for AMP6 already being signed. Investment For the first time since the industry was privatised 25 years ago there is an optimism that the negative impact of the AMP cycles is at last being resolved. There has been a lot of hard work car- ried out by the cross-industry Cyclicality Working Group and regulator Ofwat, which has led to the water companies being allowed to bring forward invest- ment from AMP6 into the last year of AMP5. As a result, companies such as Trant are not anticipating the same degree of reduction in activity levels for the rest of AMP5. Trant says its water clients have now provided their Yr programmes which, in some instances include potential early AMP6 works. The early procurement of some of the AMP6 frameworks has meant that Morgan Sindall is already collaboratively engaging with customers. Much of this investment will go into the feasibility and design stages, so it is likely that more projects will materialise on site earlier in the next AMP than possibly would have without the investment. However, how quickly this transition investment will appear remains to be seen, especially as at the time of writing only two water companies' had received their dra' determinations for 2015-2020. Aside from the change in AMP cycles, total operating expenditure (totex) and the opportunities it will present, remains the biggest talking point moving forward. Establishing the correct balance between capital expenditure the operating costs for customers will be a fundamentally new approach for many companies but it will also drive more innovation than seen during AMP5. T he leaders 2014 is the only guide that offers an insight into how the leading civil and process engineering com- panies serving the water indus- try are performing in a very competitive market place, especially with less than a year to go until the start of AMP6. We have taken the top 60 Tier 1, 2, and 3 contrac- tors and profiled each company in turn, and including accounts for the past three years*. This reveals how companies are measuring up against their rivals as the industry turns its attention towards the next five-year regulatory cycle and slowly emerges from the tough economic conditions experienced in recent years. In terms of turnover, Balfour Beatty remains top for the fourth consecutive year with revenue of £8.7B. AMEC is "For the first time since the industry was privatised 25 years ago there is an optimism that the negative impact of the AMP cycles is at last being resolved. " leaders 2104 5 Tested The general feeling is that AMP6 will significantly alter the approach needed for capital investment and the customer, the environment and collaboration are all featuring very strongly in the procurement processes that contractors are engaged in. Behavioural characteristics are also being tested by clients to ensure that col- laboration with them, partners and the supply chain will be effective, add value and deliver successful outcomes However, it remains to be seen how bold the industry will be in embracing the opportunities for sustainability and effi- ciency through a broader understanding of how the water industry sits in the big- ger community. AMP6 is expected to be characterised by smaller, more discrete works that will require a far higher degree of planning, control and innovation. Looking at future trends, contractors expect to see growth in projects that will major casualty – Daniel Contractors. The company went into administration last May as a result of financial difficulties. In The leaders 2013 we reported that Daniel Contractors had agreed a four- year, £9M funding with PNC Business Credit and RBS/National Westminster Bank. The new facility was to provide Daniel Contractors and its wholly-owned subsidiary Land & Marine Project Engi- neering with funding to support its future business objectives and strategy for growth. Land & Marine Project Engineer- ing was bought by Murphy. Of course, all eyes are now on the industry's five-yearly regulatory cycle as the final few months of AMP5 plays out. The hope is that there will not be any more supply chain casualties. *We used the most up-to-date account information available at Companies House at the time of writing. turn sewage from a waste stream into a source of renewable energy, nutrients and recycled water. January's publication of ISO's first international standard for asset management marks an opportunity for expertise within this field to help clients assess and move toward more structured management of their assets. Casualty This time last year, the industry was experiencing a spate of mergers and acquisitions. Doosan bought Enpure; Enterprise plc was snapped up by Spanish group Ferrovial; and May Gurney Integrated Services found itself at the centre of a tug of war between Costain and Kier, and which Kier won. Over the past year, these mergers and acquisitions have been going through the process of being integrated into their respective new homes. However, the past year has seen one

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