Interim Management Statement

RNS Number : 2628A

Northumbrian Water Group PLC

31 July 2008

 



31 July 2008

Northumbrian Water Group plc

("the Company")

Interim Management Statement

The Company today publishes its Interim Management Statement for the period 1 April to 30 July 2008.

The Board confirms that trading has been in line with expectations and that there have been no material events or transactions during the period.

As stated at the announcement of our preliminary results on 4 June 2008, operating costs continue to be impacted by high and volatile energy prices. Although global macro economic conditions continue to be challenging, the Company's liquidity position is very strong with funding secured to meet capital investment and operations through to at least 2011.

Of the four planning applications made in December 2007 for the Abberton reservoir scheme, three have now received approval with a decision on the fourth, for the raising of the existing reservoir, expected during the summer.

Northumbrian Water Limited will submit its Draft Business Plan to the Water Services Regulation Authority (Ofwat) by 11 August 2008.  This document, which is part of the PR09 periodic review of price limits, sets out our proposals for services and prices for the five years from 1 April 2010.

We are planning to deliver a balanced package, in line with the longer term aims set out in our Strategic Direction Statements, in each of our operating areas. Our proposals build on the current high levels of customer satisfaction with both service and value for money. As well as maintaining and improving drinking water quality and environmental performance our proposals include:

• improving the customer experience when they need to contact us;

• further reducing discoloured water complaints in the North East;

• improving satisfaction with the taste & odour of drinking water;

• securing water supplies in Essex as the population grows;

• further improving river and bathing water quality in the North East;

• reducing flooding from sewers in the North East;

• protecting operational assets from flooding; and

• reducing energy use and carbon emissions to combat climate change.

To deliver our plans, we will need to invest around £1.3bn in the period 2010-15, 22% more than in the current period. This significant increase in investment is needed to reduce sewer flooding, manage the security of water supplies in Essex and continue to deliver appropriate levels of asset maintenance despite the lower requirements for investment in mandatory drinking water and environmental improvements.

It is important that the company is able to raise the funds it requires to finance future investment. A key financial assumption in this respect is the cost of capital and the current volatile financial climate makes it difficult to assess what this should be. In our Draft Business Plan, we have assumed a cost of capital of 4.7% real, post tax, somewhat lower than at the last price review (5.1% real, post tax), partially offsetting the impact on bills of increased investment and higher operating costs. We will review our assessment for the Final Business Plan in the light of the latest information available at that time.

Although there are a number of upward cost pressures, such as energy, at this point we propose to deliver our plan with overall average annual price increases of 1.3% above inflation. Our proposals provide significant benefits for customers, with prices, we believe, most will continue to find both affordable and excellent value for money.

  Our proposals result in average household bills as shown in the table.  

Average household bills (2007-08 prices)

	1999-00 (actual) £	2009-10  (forecast) £	2014-15 (forecast) £
North East (water and sewerage)	295	282	290
Essex & Suffolk (water)	158	158	177

In the fifteen year period to 2014-15 we will have invested some £4bn in improving our assets. As the table shows, despite this investment, forecast bills in the North East for 2014-15 are slightly lower, in real terms, than those in 1999-00.  Forecast bills in Essex & Suffolk for 2014-15 are around 12% higher, in real terms, than those in 1999-00 and 2009-10 mainly due to the investment needed to address security of supply.

An extract of Part A of the Draft Business Plan, the Summary of Company Strategy, is available at www.nwg.co.uk. The full version of Part A will be published by 11 August 2008.

Outlook

We continue to deliver our regulatory outputs with excellent levels of customer service and have a strong funding position leading into the next price review.

Following the submission of our Draft Business Plan to Ofwat we will continue our discussions with all stakeholders as we work to prepare our Final Business Plan for submission in April 2009.

At the Annual General Meeting to be held later today, we will propose a final dividend of 8.07p per share, giving a full year ordinary dividend of 12.07 pence per share (an increase of 7.1%), which will be payable on 12 September 2008 to shareholders on the register as at 15 August 2008.  

The half-yearly results for the six months ending 30 September 2008 will be announced on 27 November 2008.

For further information contact:

Northumbrian Water                    0191 301 6419

John Cuthbert, Managing Director

Chris Green, Finance Director

Alistair Baker, Communications & PR Manager

Pelham PR                                  020 7743 6679

James Henderson

Chelsea Hayes

Archie Berens

 

END

 

 

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