Thames Water has announced pre-tax profits of £435m – and revealed customers can expect a 17% price rise over the next five years.
Thames Water says its £5.5bn investment plans for London’s ageing network are vital to prevent even higher bills in future.
The UK’s biggest water company has pencilled in the rise in the water bills in its business plan to regulator Ofwat, published in April.
The firm, which supplies drinking water to 8.5 million customers in London and across the Thames Valley, wants Ofwat to rubber-stamp the proposals when it publishes its decisions on the business plans of all 21 water companies next month.
Thames Water said: ‘If the company does not get approval to make this essential investment, the delay will only keep bills artificially low in the short term, as customers will pay more in the long term to maintain deteriorating assets.’
Water network investment
Thames Water has the lowest bills in the industry – averaging 81p a day. It says that, even under the higher proposals, bills will remain ‘well below’ £1 a day at £331 by 2014-15.
The firm is aiming to replace 1,300 miles of the network between 2005 and 2010 – cutting leakage by a third. More than 20% of London’s remaining water mains are more than 150 years old, while 40% are more than 100 years old.
Its spending plans for the next five years also include the construction of two tunnels which will reduce overflows from London’s sewerage system to cut pollution in the Thames and the River Lee.
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Growth in profits
Thames Water said it has squeezed down on costs to grow pre-tax profits 4% to £435.1m in the year to 31 March – but said it was now ‘in a very different climate’ as recession piles pressure on the firm.
Water firms need to make profits to fund their running costs and support the network, as well as paying a dividend and offering a good enough return to encourage the outside financing needed to help support investment programmes. Investors are now looking for higher returns in more uncertain economic times.
‘The increased cost of borrowing, combined with rising levels of customer bad debt and a sharp decline in commercial and metered demand for water is having a direct impact on the business,’ it added.
The firm’s bad debts rose 16% to £45.1m over the year, while its costs for power jumped by 30% to £78.5m. Lower metered demand due to last year’s wet summer dented revenues by £10m, and business demand is expected to weaken further this year.
‘Tough financial pressures’
Thames Water said its ‘back to basics’ approach – focusing on strong financial management and higher productivity – saw running costs fall slightly to £614.5m despite increased pressure on the business.
The savings included 150 redundancies among its 5,000 staff following a restructuring of the firm.
Thames Water paid a reduced dividend of £60m to its owners on the profits made in the year to March – less than half the £131m paid out in the previous year.
‘This reduction reflects the tough financial pressures Thames Water faces in the current economic climate,’ the firm added.
© Press Association
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