Investors warned as Yorkshire Water turns off the profit tap

Richard Flint, Chief Executive of Yorkshire Water
Richard Flint, Chief Executive of Yorkshire Water
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YORKSHIRE Water said investors can expect no more than flat profits for the next six years following the move to cancel future bill increases.

The warning follows the decision to raise bills by inflation only until 2020 as the water industry bows to pressure to keep prices down.

In the six months to September 30, the water firm’s pre-tax profits rose 16 per cent to £89.2m following previous price increases, but following the decision to raise prices by inflation only, such hikes will become a thing of the past.

Water watchdog Ofwat is taking a tough line on tariffs and refused an application for an additional price increase asked for by Thames Water.

Ofwat chairman Jonson Cox recently wrote to all water companies asking them to consider whether they needed to increase their bills for 2014/15 by the full amount set out in the last price review, given the squeeze on household incomes.

The price limits follow an outcry that Yorkshire Water paid no corporation tax last year.

Yorkshire Water’s chief executive Richard Flint said the firm works to the letter of the law and as a result of its tax efficiencies, customers pay £10 less a year.

The firm, which has five million customers, said it is planning to invest more than £3.8bn between 2015 and 2020 on a range of improvements.

These include reducing leakage by 10 million litres a day and restoring 379km of Yorkshire’s rivers to “good” ecological status in parts of the Aire, Swale, Derwent, Don and Rother.

It also plans to improve the drinking water quality at five of its treatment works which serve people in Scarborough, Selby and Sheffield and upgrade its sewer network to meet the needs of a growing population.

It promised to also help vulnerable customers pay their bills and educate households and businesses about ways to reduce their bills

Water companies are required to submit plans to Ofwat detailing exactly where service and operational investments will be made over the five years from 2015, as well as what customers will be asked to pay. In a statement Yorkshire Water said: “The company believes that by becoming even more efficient and by reducing returns to investors, it can ensure bills don’t rise by more than inflation whilst it continues to spend more than £3.8bn over the five-year period.”

The firm said it will focus on areas that customers say matter the most.

These include ensuring drinking water remains of the highest quality and that homes are protected from flooding. Yorkshire Water’s plans for the next five years will be available at from noon on Monday.

Mr Flint said the group has made savings through its voluntary redundancy scheme.

Around 130 people have taken voluntary redundancy out of a total 3,300 who work for Yorkshire Water’s parent company Kelda Group.

This has saved the company £6m to £7m in cost reductions.

Following a three-year health and safety culture change programme, the company said it has achieved its best ever health and safety performance.

Mr Flint said it has included a significant reduction in sick leave.

“We’ve got the lowest level of safety issues. We’re helping people to stay at work and we’ve created £1m worth of savings in getting people back to work early,” he said.

The group said highlights over the six-month period included investment in bathing water quality on Yorkshire’s coast and in prevention of flooding and pollu-tion.

Mr Flint said that in line with its commitment to the environment, two “energy from waste” plants are being commiss- ioned.

The first, at its waste water treatment works at Esholt near Bradford, will be operational this autumn and will generate 20GWh of energy a year.

The second plant, at Blackburn Meadows waste water treatment works near Sheffield, was funded directly by investors and will generate 8GWh a year.

Mr Flint said these investments will help the company to mitigate volatility in electricity costs and will benefit customers.

“By using sludge waste we’re turning our sewage works into power stations,” he said.

“We have over 600 sewage works, ranging from the size of a small room to a very large industrial plant.

“We have energy generation on 20 sites and we plan to make more energy from waste plants.”

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