2005 - 2006 - Pinsent Masons Water Yearbook 2012

UNITED KINGDOM PART 3 (ii): COMPANY ANALYSIS: LOCAL/REGIONAL PLAYERS
United Kingdom
AWG Plc
AWG is the holding company for Anglian Water Services and a number of infrastructure related
activities. Following the acquisition of Morrison Plc in 2000, the company was re-branded as AWG Plc.
Since 2003, AWG has been rationalising its activities as a result of problems associated with both its
international operations and Morrison, resulting in exceptional write-downs of £450 million.
Regulated activities: Anglian Water Services
Anglian Water Services Limited provides water to 4.2 million people and sewerage services to 5.4
million people in eastern England. The Anglian region is characterised by low rainfall (which will be
exacerbated in the longer term by climate change), population growth and development, especially
when related to information technology. At the same time, the region’s emphasis towards industrial
agriculture, allied with slow flowing waterways makes the region vulnerable to environmental
degradation. 200,000 new houses are forecast to be built in the Anglian water region by 2015.
As a result, AWG has concentrated on delivering a high service quality, through a well developed
infrastructure, with an emphasis on environmental compliance. The company manages demand via a
twin-track approach; the widespread use of domestic metering and low leakage rates. The high cost of
water encourages the widespread use of domestic metering and makes it feasible to have notably low
leakage rates which have reduced significantly since privatisation. The company is also seeking to
develop ways of recycling grey water (e.g. bath water) for domestic applications such as flushing
lavatories and use of grey water in the garden. Distribution losses of 6m 3 per km of pipes during 2003-
04 compares with an industry average of 11, along with metering in 54% of AWG’s domestic base is
now covered against 12% across England and Wales as a whole. In addition, 85% of the distribution
network is covered by district metering for measuring leakage at all points along the network.
In 1998, AWG acquired Hartlepool Water Plc, a SWC. Since then, Hartlepool has gained two inset
appointments in northern England within the territory served by Northumbrian Water Group Plc.
The non-regulated activities were re-aligned in 2005 into five groups:
• Morrisons (infrastructure maintenance, renewals, new-build and specialist services to the gas,
water, telecommunications and electricity sectors, PPP projects and provides specialist technical
and facilities management to the public sector, including seven PFI concessions)
• Property (Commercial and residential property developer)
• International Services (Anglian Water International, Morrison International and PURAC
International)
Anglian Water Services (AWS) has been ‘ring fenced’ and re-financed. Ring fencing has enabled the
capital structure of the business to be changed with AWS now being largely debt financed through a
£1.76 billion asset backed bond issue. The £128 million cost of this refinancing means that it will take
five years for the lower cost of debt to benefit the company. In addition, £678 million was returned to
shareholders in 2002 and 2003.
AWG Plc, profit and loss account
Y/E 31/03 (£ million) 2001 2002 2003 2004 2005
Turnover
UK water and wastewater 696.6 724.4 726.8 766.6 796.8
Morrison N/A N/A N/A 864.4 910.4
Property N/A N/A N/A 143.9 84.2
International Services N/A N/A N/A 117.9 16.7
Operating profit
UK water and wastewater 270.9 305.4 287.4 318.9 339.3
Morrison N/A N/A N/A -13.8 9.8
Property N/A N/A N/A -5.2 0.9
International Services N/A N/A N/A -13.8 0.2
Gross turnover 1,230.9 1,813.1 1,882.8 1,889.0 1,796.9
JVs 57.0 108.5 142.8 129.4 106.8
334 Pinsent Masons Water Yearbook 2005 – 2006