Utility Week

UTILITY WEEK | 13TH - 19TH APRIL 2018 | 9 Policy & Regulation highly leveraged capital structures, and changes to companies' licences. Simpson says Anglian's response to Ofwat "captures the views of all owners of the busi- ness" and demonstrates it is "nailing down" firm commitments. "These are things we were doing anyway and were not purely in response to the comments made." He explains the firm's Cay- man Islands structure was set up in 2002 and has always been reg- istered in the UK, but concedes: "It's not a good name to have. "We will simplify the structure as there's lots of companies on it. These are all clearly laid out in financial reports, but people don't always see it that way. "It's a case of perception and reality. Per- ception is reality, so if people view us in a particular way, we need to look to address it." Simpson adds: "There is an interesting discussion about the appropriate gearing level for a company. We have proven to be resilient, but the ar-gument has moved on and we have a public duty to go above and beyond. 'Cracking on now' "We're hoping for mid-70s gearing in the next AMP – along the lines of what Jonson was indicating. But we're not waiting until the next AMP to act, we're cracking on now." Simpson says the company's sharehold- ers and the board have been talking about the series of commitments for some time and suggests they have made "a hell of a commitment". "Our long-term shareholders want to con- tinue to invest and they have been supported by our shareholders, who have recently joined and made the same commitments." Private equity firm 3i Infrastructure agreed to sell its stake in Anglian Water Group (AWG), the parent company of Anglian Water, towards the end of last year. Its stake has been acquired by Dalmore Capital and GLIL Infrastructure – a joint ven- ture between five local government pension funds – aer the deal completed last month. Simpson reiterates: "The good stuff is get- ting lost, so we have chosen to look at how we can move forward instead of getting stuck in the current argument. I hope other compa- nies will follow suit – I think they will. The change needs to be a sector thing, not just one company." Responding to Anglian's announcement, a spokesperson for Ofwat comments: "All water companies and their investors need to get on the front foot by thinking proactively about how to renew trust and confidence in the water sector and meet the high standards of corporate behaviour and resili-ence that their customers expect of them." Anglian's commitments have been agreed by its board, in conjunction with its pension fund-backed shareholders: Canada Pension Plan Investment Board; Colonial First State Global Asset Management; IFM Investors; and Camulodunum (Dalmore Capital and GLIL Infrastructure). Anglian Water says it will place public interest at the "heart of the business" and will change the composition of the Anglian Water Services board so independent non- executive directors "are in the majority and not just in the largest group". Excuses 'won't wash' Gove acknowledged companies have said they will close their offshore financial arrangements, however, he stressed "excuse- mongering" about how long it will take to wind up the operations "just won't wash". At the conference he reiterated his pledge to back Ofwat and said he would give the regulator "whatever powers are necessary" to get all water companies "to up their game and further lower consumer bills". There may have been an eerie silence in the room when Gove directly challenged the sector to be "transparent and accountable" last month, but water companies were cer- tainly sitting up and listening. "It's a case of perception and reality… if people view us in a particular way, we need to look to address it" PETER SIMPSON, CHIEF EXECUTIVE, ANGLIAN WATER GROUP Other water companies' actions Towards the end of last year, Yorkshire Water and Thames Water both vowed to close their Cayman Islands subsidiaries. In October, Yorkshire announced plans to remove its offshore banking arrangements, reduce borrowing costs and simplify its finances "as part of a long-term drive to enhance services for customers". Shortly aer the announcement, Liz Barber, the company's group director of finance, regula- tion and markets, told Utility Week: "Our offshore companies in the Cayman Islands have nothing to do with tax and no matter how we try to explain, people just don't understand them. As it affects our reputation and legitimacy, we have taken the decision to get rid of them. It may take time but that's what we have decided to do." Meanwhile, in November, Thames announced the appointment of Ian Marchant as independ- ent chairman, and revealed it had asked him to lead a review of the company's corporate structure and governance. The review will be conducted with the intention of closing Thames's Cayman Islands sub- sidiaries as the water company looks to ensure the "best possible transparency" for customers and stakeholders. Marchant said: "As chairman, I will be ensuring that the governance of Thames Water is best in class. "We will conduct a thorough review and implement any changes needed to ensure that we have the right mix of skills and experience needed in this rapidly changing world, have simple and transparent structures and, importantly, that we put customers at the heart of everything we do." Anglian Water Group is owned by a consortium of investors, comprising: n Canada Pension Plan (CPP) Investment Board n Colonial First State Global Asset Management n IFM Investors n Camulodunum, itself a consortium comprising Dalmore Capital and GLIL Infrastructure. Camulodunum completed its purchase of 3i's 15 per cent stake in March 2018. ANGLIAN SHAREHOLDERS 32.9% 32.3% 19.8% 15%

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