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theView

from Water UK

theView from Water UK
15 June 2006 www.water.org.uk
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Finance

Financial results will strengthen investor confidence

In the past two weeks, water companies have been announcing preliminary financial results for 2005-06. This is the first year since the current price limits were set and the news is encouraging.

Profits are higher partly because of higher revenues allowed by the 2004 periodic review, partly through accounting changes and activity outside the sector.

This augurs well for delivery at competitive prices of the industry's huge investment programme: nearly �17 billion between 2005 and 2010. It is a welcome change from the fall in confidence after the 1999 price review.

Despite some headlines, customers as well as investors benefit from the financial performance of water companies. Bridging the gap between the companies' investment obligations and funds allowed in price limits depends on access to the debt market at attractive rates. If confidence slips, so will credit quality, leading to higher cost of capital and an upward impact on water bills.

It is too early to judge if companies will or will not outperform the regulatory contract over the current regulatory cycle, 2005-2010. Energy costs remain much higher than expected, while interest rate rises could reduce the effect of the historically low levels some companies are enjoying.

CCWater is right to expect customers � not just shareholders � to benefit from any net improved performance over the period. To the extent that companies beat efficiency targets set by the regulator, customers will gain at the next price review; in the meantime they will benefit from the service and environmental improvements set to flow from the billions being invested.

Water UK briefing

Contact: Janet Wright


Water resources

Rain May fall...

One of the wettest Mays for many years helped to replenish river and reservoir levels in drought-affected south east England, but the rain arrived too late to make much difference to groundwater.

At this time of year, most rain is taken up by growing plants and trees or lost through evaporation; very little finds its way to the aquifers that supply 70% of the region's water needs.

The short-term resources situation in the South East remains serious. Ministers, the Environment Agency, Consumer Council for Water and water companies are encouraging people to use water as efficiently as possible. The companies have allocated extra manpower and funds to dealing with leaks and are making full use of connections within and across company boundaries to ensure that best possible use is made of the water available.

Current restrictions will remain in place for the medium term. They are integral to companies' strategic water resource plans agreed with the Environment Agency and government, but despite this all parties are aware of the frustration they cause. On the other hand most people understand that by using water wisely in exceptionally dry periods everyone can play a part in helping prevent more serious restictions later on.

Drought update 07/06/06

Contact: Bruce Horton

House of Lords report on water management

A thought-provoking report by the House of Lords Science and Technology Committee encourages everyone involved in providing water services to move more confidently in several directions already taken.

The big recommendations that fit this description include:

 •  increasing investment in new resource development including reservoirs
 •  reducing leaks and household consumption
 •  collaborating to integrate economic, environmental and social interests in sustainable policies.

Water UK shares the Peers' views on extending use of meters in water-stressed areas; more investment for repair and replacement of old infrastucture; a drive for water efficiency across society; and taking a close look at affordability as bills rise to pay for essential investment.

Among the most reported aspects was the authors' concern about plans for supplying the additional houses proposed for South-East England in the Sustainable Communities project. The emphasis was on lack of early consultation with water companies although Committee Chairman Lord Selbourne accepted in broadcast interviews that communication was now good.

Water supply should not and will not hold up economic development as long as land use and water infrastructure planning go hand in hand. Sustainable development as a concept was invented to guide policy on just this sort of issue, as the Committee recognises. It should not be distorted for political ends or to give comfort to the not-in-my-back-yard tendency.

Water UK press release 06/06/06

Select Committee report: 'Water Management'

Contact: Barrie Clarke

Water Framework Directive

Analysis of cost-effective route ruled out

Assessment of the benefits of using economic instruments in achieving the objectives of the Water Framework Directive has been pre-empted by Defra, in advance of a preliminary cost effective assessment exercise due to take place in 2006 and 2007.

This exercise should provide an updated estimate of the cost of the WFD to the country and identify the principal sectors charged with curbing water pollution and returning the water environment to a good status.

However, Defra has ruled out the assessment of economic instruments that could � or could not � help reduce agricultural diffuse pollution at least cost. Without assessment, we shall never know!

Contact: Jeanne Golay

EU regulation

Seeking consistency and security from groundwater directive

The European Parliament is about to vote on a common position concerning the proposed directive on the protection of groundwater against pollution. It is calling for more harmonisation of methodologies and tighter controls.

Consideration of a Council common position by MEPs is an opportunity to ensure that the policy takes account of the big picture as well as issues of detail.

It will be important to ensure consistency between the groundwater and the water framework directives; for example overlap or duplication could lead to unnecessary constraints and over-investment by the water industry.

At the same time, groundwater resources must be protected, in particular for drinking water abstraction, so that vital sources of supply are not affected.

Contact: Gaetane Suzenet

Health

UK tap water fuels MPs in Westminster Mile

Minister for Sport Richard Caborn was among MPs who completed the �Westminster Mile' in aid of Sport Relief on 7 June, drinking London tap water to remain hydrated and full of energy.

The 70 Parliamentary �Milers� were taking part in Sport Relief 2006, raising money to support vulnerable people here in the UK and in some of the world�s poorest.

As part of the UK water industry�s partnership with the 2006 Sainsbury�s Sport Relief Mile, Thames Water supplied fresh, chilled drinking water to ensure Milers felt refreshed and enjoyed good hydration before and during the event.

And other Milers taking part in this summer�s Sainbury�s Sport Relief Mile on 15 July could raise extra funds for the charity by drinking water instead of less healthy alternatives. The Sport Relief website suggests: �Drink a glass of fresh clean tap water today instead of a soft drink and donate the money you save to Sport Relief.�

Contact: Nick Ellins

Mental health depends on good hydration - and water play!

National Men�s Health Week (12 �18 June) is helping highlight the importance of water to our mental health through the launch of the Haynes Brain Manual, published by the Men's Health Forum.

Based on the well known series of Haynes technical manuals, the book explains the essential role of drinking water in protecting our emotional health and our mental well being.

For example, drinking water helps prevent mood changes brought on by caffeinated and high sugar drinks and has a role in tackling symptoms such as anxiety, depression, loss of mental agility and poor concentration, which can be brought on by dehydration.

The manual also highlights other ways in which water improves our mental state � including our uses of water to relax through individual, family and community activities.

Men's Health Week
Men�s Health Forum

The value of water
Water UK publication, March 2005 (pdf)

Contact: Nick Ellins

Infrastructure

Future of private sewers still uncertain

The possible transfer of ownership of private sewers to water and sewerage companies was still top of the agenda at a recent meeting of the All Party Parliamentary Group on Sewers and Sewerage.

The meeting was attended by MPs and a wide range of stakeholders.

While most sewers are adopted and public and the responsibility of water and sewerage companies to maintain and repair, research suggests there are about 200,000km of private sewers serving around 10m homes.

The previous Minister was keen to see the problems resolved, but we�ve yet to hear the views of Environment Minister Ian Pearson. Defra are understood to be taking a Regulatory Impact Assessment to Ministers for a decision in principle whether to support transfer.

Should this win approval then Defra will issue a public consultation on four or five options on the scope and form of transfer. Any implementation of proposals, however, looks unlikely before the end of 2007.

Contact: Phill Mills

Drinking water

The short guide to water!

Don't know your SUDS from your SACS? Help is at hand!

No desktop should be without the new A to Z of water industry acronyms, published this month, with proceeds going to WaterAid.

Simply email Lewis Jones today for more information.

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the View...

Interesting comments this week from the new director of the United Nations Environment Programme (UNEP). Achim Steiner believes that a focus on markets will deliver better environmental outcomes than campaigning, though international policy shows little progress in this direction. "The current difficulty is that environmental issues are marginalised in economic decision-making."

This is reflected in national policy as the debate over new housing in England shows. In briefings last year we said that sustainable development requires water resources "to become a mainstream economic issue as well as a core element of environment policy"; and that it "can no longer be kept in a box labelled 'environment'".

Environmentalism has achieved many goals. The most important now is a move closer to the mainstream. Activists should not contest a positive merger because the name on the combined company is not their own.


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Related links

Financial performance

Background briefing

Water resources

Drought update

Resources briefing papers
Hosepipe bans and drought orders
Supply and demand
Leakage
Water meters
Water efficiency and demand management
Planning for growth and water resources

'Water Management' report
Water UK commment
Select Committee report

Sport Relief

Westminster Mile
Water UK press release 08/06/06

www.uktapwater.com
Water companies' sponsorship

www.sportrelief.com
Official website

Water for Health

12-18 June
Men's Health Week

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