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