Northumbrian
Water Finance Plc
PARENT COMPANY
DECISION TO PURSUE CMA REFERRAL
Northumbrian Water Limited, the parent company
of, and guarantor of bonds issued by, Northumbrian Water Finance
Plc, has today released the following announcement:
Northumbrian Water
Limited asks Ofwat to refer its PR24 Final Determination to the
Competition and Markets Authority
Northumbrian Water Limited (NWL) today (18 February 2025)
announced that it has asked Ofwat to refer its PR24 Final
Determination to the Competition and Markets Authority
(CMA).
The Board of Northumbrian Water
Limited has reached a unanimous decision to seek an independent
redetermination of its Ofwat PR24 Final Determination by the
CMA.
The company has concluded that the
Final Determination does not provide NWL with the necessary means
for the successful delivery of its business plan for 2025-2030,
which would provide required investment in the long-term resilience
of services.
Our PR24 business plan - which was
judged to be of a 'high quality' by Ofwat - was informed by
extensive consultation with customers, with a clear majority of 74%
indicating that they supported it. We designed our plan to be
ambitious and stretching, proposing a much-needed step-change in
investment to deliver high-quality water and wastewater services,
restore ageing assets, and ensure resilience for the long-term in
the face of more extreme weather conditions. This is vital to
support economic growth and to protect critical national
infrastructure and the environment for the future - in line with
the Government's wider objectives for the water sector.
We also heard a clear message from
our customers that the plan must be mindful of the ongoing cost of
living challenges they are facing. That is why our plan retained a
strong focus on efficient management of costs. The final Business
Plan we submitted combined NWL's largest investment programme ever,
with the lowest price rises across the country, resulting in the
lowest bills[1], alongside a four-fold
increase in support for customers facing cost of living
challenges.
However, despite our repeated
representations following the Draft Determination, Ofwat has
arrived at a Final Determination for NWL that strikes the wrong
balance between the need for investment and the pressure on bills.
In rejecting NWL's request for £160m on asset health
investment[2], the FD represents a
misjudgement in the minimum amount of funding needed to adequately
ensure the resilience of our assets. It would prevent us from
responding to climate change, for example ruling out back up
generation at sewage treatment works, increasing the risk of
serious pollution incidents.
While we are mindful of any impact
on customers[3] in this challenging
economic environment, accepting the FD would carry the unacceptable
risk of us being unable to deliver the outcomes our customers have
told us they want in this AMP and beyond.
Commenting on the decision to
appeal, Chief Executive Officer, Heidi Mottram CBE said:
"NWL is proud to have been recognised amongst the
highest-performing and most efficient companies in delivering for
our customers and protecting the
environment[4].
Our teams work hard to deliver our customers' expectations,
and we will always seek to innovate and go further to ensure that
our customers have reliable and resilient water and wastewater
services at an affordable cost.[5]
These priorities are at the heart of the Business Plan we
submitted to Ofwat. Fully supporting our Plan will go a long
way towards ensuring we have the ability to invest in the quality
of our services and the resilience of our assets, now and into the
future.
In
particular, the Government has rightly highlighted that "with the
frequency of extreme weather events only continuing to rise …
decisive action to invest in adapting to climate change has never
been more important"[6].
Ofwat has consistently underestimated the impact of climate change
on our customers' services, resulting in widespread under funding
in its final determinations in 2019 and now again in
2024.
With the prospect of another five years of customer services
being negatively impacted by ageing water infrastructure, NWL is
seeking a redetermination of our 2024 Business Plan by the
Competition and Markets Authority. This is the only option we have
left to us to ensure we have the means to appropriately invest in
the health and resilience of our assets.
Following an independent review by the CMA, we believe our
appeal will result in a redetermination which allows us to
implement our investment plans in full. In the meantime, we will
continue to make investments to tackle the most pressing issues
raised by our customers, such as reducing the operation of storm
overflows."
Ends
Media enquiries:
externalcommunications@nwl.co.uk
Investor
enquiries: Matt Williams, Chief Financial
Officer, Alex Rutherford, Group Treasurer
investorrelations@nwl.co.uk
NOTES TO EDITORS
About
NWL is a wholly-owned subsidiary of
Northumbrian Water Group Limited (NWGL), a company registered in
England and Wales. NWL trades in the north east of England as
'Northumbrian Water', supplying water and waste water services to
2.7 million customers, and in the south east of England as 'Essex
& Suffolk Water' (ESW) supplying water to 1.9 million
customers.
Business Plan highlights
· This is our largest
ever investment programme, with more than £1.7bn (ten times the
current approved level) invested into improving the
environment.
· This includes
working with partners across our region to improve rivers and
habitats, with a further large reduction in spills from storm
overflows (investing £1bn).
·
In Essex & Suffolk, we are
investing in new water supplies to protect rivers by reducing the
amount of water we take from the environment.
· In the
North East we have the lowest bill increase (19.5%) across the
sector, and by 2030 we will still have the lowest average bills in
England and Wales.
· Customers supported our business plan - 74% accepted our
business plan, and our plans for asset health and climate
resilience reflect customer decisions about what they
wanted.
Company Performance
· We are
a purpose led business - the most trusted water company in England,
and recognised as an ethical business seeking to care for the
essential needs of our community and environment, now and for
generations to come.
· We are
one of the most efficient companies - the industry leader in
innovation, and recognised as the most mature company in managing
our assets.
·
We are one of the highest
performing companies. We were ranked second in 2023/24, and we are
currently outperforming the expectations set by Ofwat in
2019.
· We have
consistently been one of the highest environmental performers
(under the EA's star ratings system) - with some of the lowest
levels of pollution and some of the cleanest rivers and beaches in
the country. However, we know the whole sector needs to do more. We
welcome the opportunity for greater investment, and our business
plan is the first steps towards meeting our long-term commitments
to meet our ambition to restore and regenerate our natural
environment.
·
We are the only large water company
that Ofwat considers has have met its expectations on dividends and
performance related pay.
