UU. United Utilities Group Plc

 
TIDMUU. 
 
United Utilities Group PLC 
 
2 December 2013 
 
                    UNITED UTILITIES BUSINESS PLAN 2015-20 
 
United Utilities Water PLC has today submitted to Ofwat its business plan 
covering the 2015-20 period. 
 
Balanced plan 
 
Our business plan for the next five-year period means that customers would 
benefit from below inflation average household bills for the decade to 2020. We 
have sought the views of over 27,000 customers, as well as consulting with our 
regulators, to deliver a plan which we believe strikes the right balance for 
all our stakeholders. This includes a substantial capital investment programme 
to meet our environmental obligations and which will provide a significant 
contribution to the North West economy. Our plan reflects the views of 
customers on service and affordability, it delivers a paced environmental 
programme and it provides an appropriate return for investors. 
 
Customer bills 
 
Extensive stakeholder engagement has highlighted that the principal concern for 
customers is affordability. Customers are generally satisfied with the current 
high levels of water and wastewater services being provided and are only 
prepared to pay for specific targeted areas of improvement, with 86% of 
household customers supportive of bill rises no higher than inflation. This has 
been a key driver in the formulation of our plan and we are proposing an 
average real terms bill decrease of 1.7% for household customers across the 
five-year period (excluding the impact of the previously announced special 
customer discount of cGBP20 million to be applied to 2014/15 bills). 
 
For non-household customers, we are proposing an average real terms bill 
decrease of 0.5% in 2015/16 with a total real terms increase of 2.5% by 2019/ 
20. We have tested this proposal with non-household customers and 76% are 
supportive and we will work hard to help them reduce their overall spend. 
 
Total expenditure 
 
Our plan includes total expenditure of GBP6.6 billion (2012/13 prices). This 
comprises capital investment (capex), including infrastructure renewals 
expenditure, of GBP3.8 billion and operating expenditure (opex) of GBP2.8 billion. 
This mix of opex and capex has been derived from the optimal cost assessment 
over the life of our assets. We have reflected this mix in setting the 
wholesale business `pay as you go'1 ratio of 50%, which would result in real 
growth in the regulatory capital value of around GBP800 million over the 2015-20 
period. 
 
Operating expenditure 
 
Our plan includes initiatives designed to save around GBP66 million per annum of 
opex by 2019/20, relative to 2012/13. This will largely offset the unavoidable 
cost increases in areas such as rates and power, alongside the addition of 
private pumping stations and enhancement programme costs. 
 
Capital expenditure 
 
Our proposed GBP3.8 billion capital investment programme (net of grants and 
contributions) comprises GBP1.3 billion for the water service, GBP2.4 billion for 
the wastewater service and GBP0.1 billion for the retail service. Investment to 
meet tighter regulatory quality standards, enhance service to customers and 
maintain the supply/demand balance is forecast at around GBP1.5 billion, with the 
remainder relating to maintenance. We have kept capex constrained at GBP3.8 
billion by meeting new environmental obligations via a phased approach, 
supported by the Environment Agency and the Drinking Water Inspectorate. 
 
Company specific adjustments 
 
Reflecting the impact of the extreme levels of deprivation in the North West on 
our costs, we are seeking an adjustment to the household retail average cost to 
serve of around GBP25 million per annum. We have provided robust evidence to 
Ofwat in support of this approach. 
 
We have worked hard with the Environment Agency to constrain and balance our 
expenditure programme. Nonetheless, similar to previous regulatory periods, our 
wastewater spend includes a significant environmental programme. In view of our 
regional differences, we believe it is necessary to assess this programme 
outside of Ofwat's totex modelling methodology. 
 
Return on capital 
 
In deriving the weighted average cost of capital (WACC) in our business plan, 
we have carefully considered both financeability and customer affordability. In 
light of this, we have adopted a real, vanilla WACC2 of 4.1% for our wholesale 
business. When adding in our proposed non-household retail margin of 4%, this 
translates to an overall appointed business WACC of 4.3%. 
 
Next steps 
 
Ofwat is expected to publish draft determinations by August 2014, with final 
determinations due by December 2014. 
 
United Utilities' contacts 
 
For further information on the day, please contact: 
 
Gaynor Kenyon - Corporate Affairs Director          +44 (0) 7753 622282 
 
Darren Jameson - Head of Investor Relations         +44 (0) 7733 127707 
 
Peter Hewer / Michelle Clarke - Tulchan             +44 (0) 20 7353 4200 
Communications 
 
This announcement and a summary of the business plan will be available on the 
day at: http://corporate.unitedutilities.com/investors.aspx 
 
1 `Pay as you go' ratio is the proportion of wholesale total expenditure 
recovered directly through wholesale revenues 
 
2 Vanilla WACC is derived from pre-tax debt and post-tax equity 
 
 
 
END 
 

United Utilities (LSE:UU.)
Historical Stock Chart
From Jun 2024 to Jul 2024

United Utilities (LSE:UU.)
Historical Stock Chart
From Jul 2023 to Jul 2024