NI Wa­ter posts pre-tax prof­its of £100m in ‘strong year’

Belfast Telegraph - Business Telegraph - - Front Page - BY STAFF RE­PORTER

NI WA­TER has posted pre-tax prof­its of more than £100m amid “an­other strong year of busi­ness per­for­mance”, its chief ex­ec­u­tive has said.

The Govern­ment-owned wa­ter sup­plier said it also in­vested more than £154m across the net­work dur­ing 2016/17. Over­all, rev­enue rose to £422.4m for the year end­ing March 31, 2017, ac­cord­ing to the an­nual re­port pub­lished to­day.

NI Wa­ter chair­man Dr Len O’ha­gan said the util­ity op­er­a­tor “de­liv­ered record lev­els of waste­water com­pli­ance”.

“Wa­ter qual­ity com­pli­ance re­mains at near record lev­els. Much of what we de­liver takes place un­der­ground or out of sight,” he said.

“In 2016/17 we in­vested £154.3m to main­tain and im­prove our treat­ment works and net­works. This in­cluded the de­liv­ery of 172km of wa­ter mains, com­ple­tion of the Car­land to Cook­stown strate­gic wa­ter trunk main, Co Ty­rone and Black­rock Waste­water Treat­ment Works.”

Dr O’ha­gan said the in­vest­ment “plays an im­por­tant role in un­der­pin­ning economic growth”.

“The Ul­ster Univer­sity Busi­ness School es­ti­mates that for ev­ery £1 of ex­pen­di­ture by NI Wa­ter, the mul­ti­plier ef­fect in the lo­cal econ­omy is al­most dou­ble,” he added.

He said ef­fi­cien­cies en­abled “us to keep bills af­ford­able for our 80,000 non-do­mes­tic cus­tomers”.

“Tak­ing into ac­count inflation, our non-do­mes­tic cus­tomers are pay­ing 12% less, on av­er­age, for their wa­ter and sew­er­age ser­vices than they did five years ago.”

And Sara Ven­ning, NI Wa­ter chief ex­ec­u­tive, said: “Recog­nis­ing the im­por­tant role NI Wa­ter plays in sup­port­ing health, safe­guard­ing the en­vi­ron­ment and pro­mot­ing a strong re­gional econ­omy, I’m de­lighted to bring for­ward this re­port set­ting out an­other strong year of busi­ness per­for­mance.

“We have com­pleted the sec­ond year of our six-year busi­ness plan, a strong am­bi­tious plan de­signed to bring ser­vices in line with best in class across the in­dus­try. We con­tinue to de­liver near record lev­els of cus­tomer ser­vice at a lower cost, whilst pro­tect­ing the en­vi­ron­ment.

“Over the last decade, we have been lead­ing the chal­lenge on do- ing more for cus­tomers with fewer re­sources. We have trans­formed the de­liv­ery of wa­ter and waste- wa­ter ser­vices, de­liv­er­ing record lev­els of ser­vice and reach­ing lev­els of ef­fi­ciency on par with some of the lead­ing wa­ter com­pa­nies in England and Wales.”

NI Wa­ter said that dur­ing the last year, it over­saw the “de­liv­ery of near record lev­els of wa­ter qual­ity com­pli­ance and record lev­els of waste­water com­pli­ance”, along with the launch of a new “vir­tual cus­tomer ser­vice cen­tre”.

“We con­tinue to strengthen our lead­er­ship team to im­ple­ment our strat­egy,” Dr O’ha­gan said.

“In Jan­uary 2017, Paul Harper joined us as our new di­rec­tor of as­set de­liv­ery as part of a re-or­gan­i­sa­tion to en­sure our as­set man­age­ment and cap­i­tal de­liv­ery pro­cesses sup­port de­liv­ery of our cus­tomer prom­ises.”

In the lat­est re­port, speak­ing about Brexit, it says there are “un­cer­tain­ties around fu­ture leg­is­la­tion, free­dom of move­ment and economic sta­bil­ity. We have con­sid­ered the risks and op­por­tu­ni­ties sur­round­ing Brexit and have es­tab­lished an in­ter­nal work­ing group to man­age its im­pact”.

“The risks and op­por­tu­ni­ties sur­round­ing Brexit do not form part of NI Wa­ter’s prin­ci­pal risks and op­por­tu­ni­ties but are man­aged as part of NI Wa­ter’s risk man­age­ment process.”

Mean­while, the re­port says: “We have made sig­nif­i­cant progress in de­liv­er­ing a more re­silient wa­ter in­fra­struc­ture. There has been sig­nif­i­cant re­duc­tion in the de­mand from the 2012 Wa­ter Re­source Plan. This re­duc­tion has been achieved through leak­age de­tec­tion and sus­tained in­vest­ment in wa­ter mains to re­duce leak­age, along with re­duced house­hold and non-house­hold de­mand.”

NI Wa­ter is the largest provider in North­ern Ire­land of a key in­fra­struc­ture ser­vice af­fect­ing ev­ery house­hold and busi­ness. As­sess­ing the per­for­mance of NI Wa­ter is multi-di­men­sional. The im­me­di­ate ‘ top line’ is its prof­itabil­ity fol­lowed crit­i­cally by its ma­jor in­vest­ment pro­gramme and, for the longer term, the plan­ning for fu­ture stan­dards of sus­tain­abil­ity, ef­fi­ciency and mod­ern de­vel­op­ment.

In the lat­est fi­nan­cial year, to March 2017, the or­gan­i­sa­tion had cur­rent rev­enue of £422m, up just over 2% on the pre­vi­ous year.

Cur­rent rev­enue came from di­rect charges to busi­ness cus­tomers, £74m, and an op­er­at­ing sub­sidy from Govern­ment, £284m, as an al­ter­na­tive to charges to house­holds for their us­age of wa­ter and sew­er­age ser­vices.

As part of cur­rent rev­enue, the or­gan­i­sa­tion takes as a credit the trans­fer of in­stal­la­tion as­sets ini­tially paid for by cus­tomers of £32m.

Other rev­enue was raised as a charge to the De­part­ment of In­fra­struc­ture for road drainage, £21m, and con­nec­tion and other charges, £11m.

The fi­nan­cial pre­sen­ta­tion of the re­sults for NI Wa­ter fo­cuses both on its over­all trad­ing prof­its and on the scale and fi­nanc­ing of the cap­i­tal ex­pen­di­ture needed to main­tain its as­sets.

NI Wa­ter made pre-tax prof­its (ex­clud­ing the value of trans­ferred as­sets) of £70.8m, up just over £4m on the pre­vi­ous year. In con­ven­tional terms, this is an at­trac­tive rate of re­turn on the bal­ance sheet value of as­sets at nearly £3bn. From its re­tained prof­its, £24.7m was paid as div­i­dends to the owner, the De­part­ment for In­fra­struc­ture, thus re­duc­ing the over­all cur­rent cost to the tax­payer to nearer £259m.

The healthy trad­ing re­sults are partly an out­come of im­prov­ing ef­fi­ciency in the or­gan­i­sa­tion and an abil­ity to man­age within the rev­enue per­mit­ted by the Reg­u­la­tor as part of the sec­ond year of a six year per­for­mance frame­work.

Spend­ing on the lat­est an­nual cap­i­tal in­vest­ment pro­gramme of NI Wa­ter was £154m, nearly £20m more than in 2015-16.

With cap­i­tal as­sets val­ued at nearly £3bn and an an­nual de­pre­ci­a­tion pro- vi­sion of nearly £72m, the need for and the fi­nanc­ing of the cap­i­tal pro­gramme is a ma­jor fea­ture of the an­nual re­port­ing. The £154m pro­gramme has been fi­nanced by a mix­ture of funds from de­pre­ci­a­tion, re­tained money from post-tax prof­its and, af­ter div­i­dend pay­ments, with in­creased bor­row­ing of £30m from Govern­ment.

As at the end of the fi­nan­cial year, the bal­ance sheet shows that NI Wa­ter has out­stand­ing (non-cur­rent) loans and bor­row­ing of £1.21bn.

A £1.7bn long-term con­tin­u­ing cap­i­tal im­prove­ment pro­gramme, to be de­liv­ered within a six year set­ting, was orig­i­nally ap­proved by the reg­u­la­tor. That pro­gramme has been ad­justed, down­ward, in an agree­ment be­tween Govern­ment, the Reg­u­la­tor and NI Wa­ter, to de­liver £990m in a six year pe­riod.

That longer term cap­i­tal pro­gramme com­bines both the nec­es­sary re­place­ment of as­sets as they reach the end of their use­ful lives, as well as an an­tic­i­pa­tion of the ex­pected in­creas­ing vol­umes of fresh wa­ter, waste wa­ter and sew­er­age that will be needed. Head­line projects emerg­ing in­clude ma­jor waste wa­ter treat­ment ca­pac­ity needs in Bal­ly­cas­tle and Dun­gan­non.

A dra­matic il­lus­tra­tion of pend­ing fu­ture cap­i­tal in­vest­ment needs is that for the Belfast area there may be a fu­ture call for nearly £750m to en­hance ser­vices.

The ca­pac­ity for waste wa­ter treat­ment will be in­ad­e­quate to meet grow­ing de­mand and a fea­si­bil­ity study is un­der­way for what may be a £300m in­vest­ment to be com­pleted by 2027.

Strat­egy: Dr Len O’ha­gan

NI Wa­ter had rev­enue of £422m in the last fi­nan­cial year, its ac­counts show

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