2005 - 2006 - Pinsent Masons Water Yearbook 2012

UNITED KINGDOM PART 3 (ii): COMPANY ANALYSIS: LOCAL/REGIONAL PLAYERS
First Aqua (Southern Water Plc)
Southern Water provides water services to 2.3 million people (1 million connections) in south and
south east England. The company provides sewerage services to a further 2.2 million people (1.8
million connections) who are served by the following water only companies: Folkestone and Dover
Water, Mid Kent Water, South East Water, Portsmouth Water, Bournemouth & West Hampshire Water
Cholderton and District Water, (not covered in this book, 1,500 people served) and Sutton and East
Surrey Water. Since 1989, the company has reduced distribution losses from 26% to 11%, saving
148Ml per day. Despite its changing hands twice over the past six years, the company has been one
of the most consistent performers in terms of service delivery.
Southern Water was acquired by ScottishPower in 1996 following a hostile take-over. ScottishPower
sold Southern Water to the Royal Bank of Scotland’s First Aqua consortium in April 2002 for £2,050
million, equivalent to SW’s regulatory value. As part of this, Veolia Water UK (the UK water arm of VE)
was granted an option to acquire 20% of Southern Water and in turn to launch a full bid for the
company. After political pressure in the UK prevented VE’s bid proceeding, VE consolidated a partial
acquisition. First Aqua was acquired by Southern Water Investments in March 2003. In turn, Southern
Water Capital (49% held by Royal Bank of Scotland and 51% by institutional investors) holds 75% of
Southern Water Investments, with VE holding the other 25%. For VE, the £160 million investment
(plus £110 million in Preference Shares, exercisable from 2008), is some way below its original £374
million investment.
Southern Water Services Limited, profit and loss account
Y/E 31/03 (£ million) 2001 2002 2003 2004 2005
Water turnover 120.5 116.5 115.6 118.2 120.7
Sewerage turnover 301.9 307.4 315.5 330.1 346.8
Total turnover 422.4 423.9 436.5 455.1 475.0
Operating profits 153.5 126.8 131.2 174.6 184.8
In 2003, First Aqua was refinanced based upon a series of AAA wrapped bond issues:
In April 2005, Southern Water outsourced part of its capital investment programme to ‘4Delivery
Limited’, a joint venture vehicle owned by United Utilities (40%), Costain (40%) and Montgomery
Watson Harza (20%). Under the contract, 4D is required to manage, design and deliver 255 schemes,
which are all stand alone construction projects for the modification or extension of existing water
mains, sewers, water supply works and wastewater treatment works during the 2005-10 asset
management programme. The total value of the contract is for approximately £750 million.
Bonds (million) Maturity (date) Rating & coupon
£350 2029 AAA 6.202% fixed
£188 2034 AAA 3.716% index linked
£300 2007 AAA 6.185% fixed
£350 2026 A-minus 6.650% fixed
£153 2023 A-minus 3.826% index linked
£120 2013 A-minus 6.935% fixed to 2009
£250 2038 BBB 7.879% fixed to 2014
Contact Details
Name: Southern Water
Address: Southern House, Yeoman Road,
Worthing, BN13 3NX
Tel: 0845 278 0845
E-mail: www.southernwater.co.uk
Robert Thian (Chairman)
Howard Goodbourn (Finance Director)
Barrie Delacour (Corporate Strategy Director)
344 Pinsent Masons Water Yearbook 2005 – 2006