Utility Week

UtILItY WeeK | 4th - 10th November 2016 | 9 Interview T his year, Castle Water unleashed itself on the Eng- lish water market. In January, it revealed a deal with Portsmouth Water to take on its business cus- tomer base as that firm became the first to exit the com- petitive field for non-domestic water supply. In July, it grabbed headlines again with its acquisition of Thames Water's non-household accounts. That deal shocked the market. It saw Castle grow ten- fold in an instant – from 30,000 to around 330,000 cus- tomers. It is now the second-largest retailer in the English market, a‚er incumbent joint venture Water Plus. At the head of this disruptive new player in the Eng- lish market is John Reynolds, an ambitious and some- what austere former banker. Utility Week meets Reynolds at Castle Water's strong- hold – literally, for Castle Water actually has a castle to call home – and asks how the company is coping with its sudden growth. He pauses briefly to consider his answer. "It is a high level of growth from where Castle Water is now, but it's not very big compared with the activities any of our management team have run before." He points out that a quarter of a million customers is considered a small number in utility and financial ser- vices terms. "Our operations team, our finance team, our account management team all come from larger back- grounds, so we don't see this as a massive challenge." The reason for the acquisition was simple: expansion in bulk. "With the economics in England, we don't think the strategy for incremental growth is always going to be attractive. The way the market was developed has been very institutional, so the influence on the development of the market in England came from large organisations." In this seemingly incumbent-friendly landscape, Reynolds saw an urgent need to adopt a core customer base south of the border, and then to achieve scale. Its two acquisitions have answered the challenge perfectly. "Portsmouth Water was a fantastic opportunity for us because it was a similar size to our customer base in Scotland, and relatively easy to manage as a first trans- action," says Reynolds. "We saw Thames Water's as the most attractive customer base in England." Further acquisitions could be on the cards, but cer- tainly not until a‚er the market has opened. For now, the firm is entirely focused on making the shadow market work and then entering the national market in England. "In particular, we're looking very closely at contract customer opportunities that relate to the whole market across England and Scotland," says Reynolds. Castle Water's strategy across both competitive mar- kets will unfold from its spectacular HQ. Perched on a hill just north of the village of Blairgowrie in rural Perth- shire sits Craighall Castle – the imposing residence of Reynolds and, in the grounds, Castle Water. Reynolds bought the castle, and the surrounding 180 acres of land, from the Baron of Rattray in 2010 a‚er making his fortune in the City. When Castle Water received its Scottish water supply and sewerage licence in 2014, he based the company at his home because he doesn't like commuting. "When we started it up, it was easy enough to start here. When we got a bit bigger we thought about whether to move to Perth, Dundee or further afield, but we decided we wanted to have a very specific identity of our own." But Castle Water's imposing location gives the firm more than a quirky back story and something to hook its culture on, Reynolds adds. "What we aim to do is have a lower cost base, and it's a relatively low-cost area to operate in, so we can always compete on price." This thri‚iness has remained central as Castle has expanded. When it took on Portsmouth's business cus- tomer base, it established a small, low-cost office locally, and is currently in the process of doing the same in Lon- don to serve those that have transferred from Thames. Central customer services will all, however, continue to be based in Perthshire, which Reynolds says is a good environment to run these kind of operations from. "I don't think it's any accident that within the same area we have SSE and Aviva. There is quite a chunk of customer service activity that goes on in this area, on a large scale, for utilities and financial services." The company's goal is to be open and deliver high- quality service transparently to customers. Reynolds

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