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MS40021 MSI WATER SUPPLY INDUSTRY: UK: FEBRUARY 2001

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EXECUTIVE SUMMARY

In the year to March 2000 capital expenditure by the UK water industry increased marginally to £4.5 million (€7.6 million), with investment varying by region. Indeed, capital expenditure in England and Wales declined by some 2 percent during this period, reflecting the completion of major projects prior to the introduction of the Periodic Review in April 2000.

The largest proportion of total capital expenditure by the UK water industry was accounted for by investment in England and Wales in the year to March 2000. Indeed, capital expenditure by the water and sewerage companies, the water only companies and the Environment Agency represented some 90 percent of the total. A further 8 percent was accounted for by investment by the Scottish water authorities and the remaining 2 percent by investment in the water industry in Northern Ireland.

Within England and Wales the water and sewerage companies continue to represent the largest investors. Indeed, in the year to March 2000 investment by the water and sewerage companies accounted for some 84 percent of total capital expenditure in England and Wales. The Environment Agency and the water only companies accounted for 10 percent and 6 percent respectively during the same period. The differing levels of investment highlight the variations in the area of supply served by the water and sewerage companies and the water only companies.

The main factors affecting investment by the water industry are legislation, sources of finance and regional characteristics. However, there are a number of additional factors influencing investment such as meeting customer requirements, improving customer services, metering, pricing, concerns over climate change and increases in demand as a result of population increases.

Capital expenditure by the water industry in England & Wales is forecast to continue to be in excess of £3 million (€5 million) per year throughout the forecast period. Indeed, a high level of capital expenditure will be required in order to meet higher standards of drinking water quality and to deliver environmental improvements.

In the year to March 2000 capital expenditure by the Scottish water industry increased by 18 percent to £378.1 million (€635.2 million), some 43 percent of which was accounted for by expenditure on water supply related projects. However, the proportional importance of investment in water related projects declined as a result of new sewage disposal legislation.

Capital expenditure by the Scottish water industry is forecast to continue increasing, although the rate of growth is expected to slow. The greatest proportion of expenditure will continue to be focused on sewerage projects.

In the year to March 2000 capital expenditure by the water industry in Northern Ireland increased by 37 percent to £100 million (€168 million). This increase reflects the commitment of the Water Service to meeting standards set by national and European directives.

Capital expenditure by the Northern Irish water industry is forecast to continue increasing, rising by a forecast 13 percent in the year to March 2001. Future investment by the water industry in Northern Ireland is expected to be focused on water related programmes

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TABLE OF CONTENTS

Table of Contents
1 Executive Summary 1
2 INTRODUCTION 3
2.1 Definitions 3
2.2 Methodology 8
2.3 Economic Background 8
2.3.1 Interest Rates 10
2.3.2 Inflation 11
2.3.3 Exchange Rates 11
2.3.4 Taxation 12
2.3.5 Household Income and Consumer Expenditure 13
2.3.6 Manufacturing Output 14
2.3.7 Services 15
2.3.8 Investment 15
2.3.9 Forecasts 16
2.4 Exchange Rates 17
2.5 Abbreviations 17
3 MARKET OVERVIEW 20
3.1 Water Supply Market 20
3.2 UK Water And Sewerage Industry Structure 22
3.3 Regulatory Authorities 27
3.3.1 England And Wales 27
3.3.2 Scotland 28
3.3.3 Northern Ireland 29
4 CAPITAL EXPENDITURE 30
4.1 Overview 30
4.2 England And Wales 31
4.2.1 Capital Expenditure, 1996-2000 31
4.2.1.1 Overview 31
4.2.1.2 Capital Expenditure By The Water and Sewerage Companies 33
4.2.1.3 Capital Expenditure By The Water Only Companies 38
4.2.1.4 Capital Expenditure By The EA 42
4.2.2 Factors Affecting Investment 44
4.2.2.1 Overview 44
4.2.2.2 Legislation 44
4.2.2.3 Sources of Finance 46
4.2.2.4 Regional Characteristics 49
4.2.2.5 Other 49
4.2.3 Forecast Capital Expenditure, 2000-2005 50
4.2.3.1 Overview 50
4.2.3.2 Forecast Capital Expenditure By The Water And Sewerage Companies 52
4.2.3.3 Forecast Capital Expenditure By The Water Only Companies 54
4.2.3.4 Forecast Capital Expenditure By The Environment Agency 56
4.3 Scotland 58
4.3.1 Overview 58
4.3.1.1 Introduction 58
4.3.1.2 Capital Expenditure, 1996-2000 59
4.3.1.3 Factors Affecting Investment 60
4.3.1.4 Forecast Capital Expenditure, 2001-2005 60
4.3.2 West of Scotland Water Authority 62
4.3.2.1 Overview 62
4.3.2.2 Capital Expenditure, 1996-2000 62
4.3.2.3 Forecast Capital Expenditure, 2001-2005 63
4.3.3 East of Scotland Water Authority 64
4.3.3.1 Overview 64
4.3.3.2 Capital Expenditure, 1996-2000 65
4.3.3.3 Forecast Capital Expenditure, 2001-2005 66
4.3.4 North of Scotland Water Authority 66
4.3.4.1 Overview 66
4.3.4.2 Capital Expenditure, 1996-2000 67
4.3.4.3 Forecast Capital Expenditure, 2001-2005 68
4.4 Northern Ireland 70
4.4.1 Overview 70
4.4.2 Capital Expenditure, 1996-2000 71
4.4.3 Factors Affecting Investment 72
4.4.4 Forecast Capital Expenditure, 2001-2005 73
5 OPPORTUNITIES FOR SUPPLIERS 75
6 Water And Sewerage Companies 77
6.1 Overview 77
6.2 Anglian Water 79
6.2.1 Overview 79
6.2.2 Business Profile 80
6.2.3 Capital Expenditure, 1996-2000 81
6.2.4 Forecast Capital Expenditure, 2001-2005 82
6.3 Hyder 83
6.3.1 Overview 83
6.3.2 Business Profile 84
6.3.3 Capital Expenditure, 1996-2000 84
6.3.4 Forecast Capital Expenditure, 2001-2005 85
6.4 North West Water 86
6.4.1 Overview 86
6.4.2 Business Profile 87
6.4.3 Capital Expenditure, 1996-2000 88
6.4.4 Forecast Capital Expenditure, 2001-2005 89
6.5 Northumbrian Water Group 90
6.5.1 Overview 90
6.5.2 Business Profile 91
6.5.3 Capital Expenditure, 1996-2000 92
6.5.4 Forecast Capital Expenditure, 2001-2005 93
6.6 Severn Trent Water 94
6.6.1 Overview 94
6.6.2 Business Profile 95
6.6.3 Capital Expenditure, 1996-2000 96
6.6.4 Forecast Capital Expenditure, 2001-2005 97
6.7 South West Water 98
6.7.1 Overview 98
6.7.2 Business Profile 99
6.7.3 Capital Expenditure, 1996-2000 99
6.7.4 Forecast Capital Expenditure, 2001-2005 100
6.8 Southern Water 101
6.8.1 Overview 101
6.8.2 Business Profile 102
6.8.3 Capital Expenditure, 1996-2000 102
6.8.4 Forecast Capital Expenditure, 2001-2005 104
6.9 Thames Water 105
6.9.1 Overview 105
6.9.2 Business Profile 106
6.9.3 Capital Expenditure, 1996-2000 106
6.9.4 Forecast Capital Expenditure, 2001-2005 107
6.1 Wessex Water 108
6.10.1 Overview 109
6.10.2 Business Profile 109
6.10.3 Capital Expenditure, 1996-2000 109
6.10.4 Forecast Capital Expenditure, 2001-2005 110
6.11 Yorkshire Water 111
6.11.1 Overview 112
6.11.2 Business Profile 112
6.11.3 Capital Expenditure, 1996-2000 113
6.11.4 Forecast Capital Expenditure, 2001-2005 114
7 Water Only Companies 116
7.1 Overview 116
7.2 Bournemouth and West Hampshire Water 118
7.2.1 Overview 118
7.2.2 Business Profile 118
7.2.3 Capital Expenditure, 1996-2000 119
7.2.4 Forecast Capital Expenditure, 2001-2005 119
7.3 Bristol Water Holdings 120
7.3.1 Overview 121
7.3.2 Business Profile 121
7.3.3 Capital Expenditure, 1996-2000 122
7.3.4 Forecast Capital Expenditure, 2001-2005 122
7.4 Brockhampton Holdings (incorporating Portsmouth Water) 123
7.4.1 Overview 124
7.4.2 Business Profile 124
7.4.3 Capital Expenditure, 1996-2000 124
7.4.4 Forecast Capital Expenditure, 2001-2005 125
7.5 Cambridge Water 126
7.5.1 Overview 127
7.5.2 Business Profile 127
7.5.3 Capital Expenditure, 1996-2000 127
7.5.4 Forecast Capital Expenditure, 2001-2005 128
7.6 Dee Valley Water 129
7.6.1 Overview 129
7.6.2 Business Profile 130
7.6.3 Capital Expenditure, 1996-2000 131
7.6.4 Forecast Capital Expenditure, 2001-2005 131
7.7 Essex & Suffolk Water 133
7.7.1 Overview 133
7.7.2 Business Profile 133
7.7.3 Capital Expenditure 134
7.7.4 Forecast Capital Expenditure, 2001-2005 135
7.8 Folkestone & Dover Water Services 137
7.8.1 Overview 137
7.8.2 Business Profile 137
7.8.3 Capital Expenditure, 1996-2000 138
7.8.4 Forecast Capital Expenditure, 2001-2005 139
7.9 Hartlepool Water 140
7.9.1 Overview 140
7.9.2 Business Profile 140
7.9.3 Capital Expenditure, 1996-2000 141
7.9.4 Forecast Capital Expenditure, 2001-2005 142
7.1 Mid Kent Water 142
7.10.1 Overview 142
7.10.2 Business Profile 142
7.10.3 Capital Expenditure, 1996-2000 143
7.10.4 Forecast Capital Expenditure, 2001-2005 144
7.11 North Surrey Water 146
7.11.1 Overview 146
7.11.2 Business Profile 146
7.11.3 Capital Expenditure, 1996-2000 147
7.11.4 Forecast Capital Expenditure, 2001-2005 147
7.12 South East Water 148
7.12.1 Overview 149
7.12.2 Business Profile 149
7.12.3 Capital Expenditure, 1996-2000 150
7.12.4 Forecast Capital Expenditure, 2001-2005 151
7.13 South Staffordshire Group 152
7.13.1 Overview 152
7.13.2 Business Profile 153
7.13.3 Capital Expenditure, 1996-2000 153
7.13.4 Forecast Capital Expenditure, 2001-2005 154
7.14 Sutton and East Surrey Water 155
7.14.1 Overview 155
7.14.2 Business Profile 156
7.14.3 Capital Expenditure, 1996-2000 156
7.14.4 Forecast Capital Expenditure, 2001-2005 157
7.15 Tendring Hundred Water Services 158
7.15.1 Overview 158
7.15.2 Business Profile 158
7.15.3 Capital Expenditure, 1996-2000 159
7.15.4 Forecast Capital Expenditure, 2001-2005 160
7.16 Three Valleys Water 161
7.16.1 Overview 161
7.16.2 Business Profile 161
7.16.3 Capital Expenditure, 1996-2000 162
7.16.4 Forecast Capital Expenditure, 2001-2005 163
7.17 York Waterworks 164
7.17.1 Overview 164
7.17.2 Business Profile 165
7.17.3 Capital Expenditure,1996-2000 165
7.17.4 Forecast Capital Expenditure, 2001-2005 166
8 MAGAZINES 167
9 Trade Associations 169
10 Regulatory Organisations 170
List of Tables
1.        Retail Price Indices Used In This Report 4
2.        Economic Indicators On The UK Economy, 1995-2002 10
3.        Public Water Supplied In The UK, 1995-1999 21
4.        Public Water Supplied In The UK, By Region, 1999 22
5.        Areas Of Diversification For Selected WaSCs And WoCs 24
6.        Reorganisation Of Scotland’s Water And Sewerage Industry 26
7.        Total Capital Expenditure By The UK Water Industry, By Region, 1999 And 2000 30
8.        Total Capital Expenditure By The Water Industry In England And Wales, 1996-2000 32
9.        Total Capital Expenditure By The Water Industry In England And Wales, By Type Of Company, 1996-2000 33
10.     Total Capital Expenditure By The Water And Sewerage Companies In England And Wales, 1996-2000 34
11.     Total Capital Expenditure By The Water And Sewerage Companies In England And Wales, By Company, 1996-2000 34
12.     Capital Expenditure On Water Supply Projects By The Water And Sewerage Companies In England And Wales, By Company, 1996-2000 36
13.     Proportional Importance Of Capital Expenditure On Water Supply Projects, By Water And Sewerage Company And By Type Of Service, 2000 37
14.     Total Capital Expenditure By The Water Only Companies In England And Wales, 1996-2000 38
15.     Total Capital Expenditure By The Water Only Companies In England And Wales, By Company, 1996-2000 40
16.     Proportional Importance Of Capital Expenditure By The Water Only Companies In England And Wales, By Company And By Type Of Service, 2000 41
17.     Total Capital Expenditure By The EA, 1996-2000 43
18.     Total Capital Expenditure By The EA, By Core Function, 1997-2000 44
19.     Forecast Average Annual Price Rise Limits Of Water And Sewerage Companies, By Company, 2001-2005 47
20.     Forecast Average Annual Price Rise Limits Of Water Only Companies, By Company, 2001-2005 48
21.     Forecast Total Capital Expenditure By The Water Industry In England And Wales, 2001-2005 50
22.     Forecast Total Capital Expenditure By The Water Industry In England And Wales, By Type Of Company, 2001-2005 51
23.     Forecast Total Capital Expenditure By The Water And Sewerage Companies In England And Wales, 2001-2005 53
24.     Forecast Total Capital Expenditure By The Water And Sewerage Companies, By Company, 2001-2005 54
25.     Forecast Total Capital Expenditure By The Water Only Companies In England And Wales, 2001-2005 55
26.     Forecast Total Capital Expenditure By The Water Only Companies, By Company, 2001-2005 56
27.     Forecast Total Capital Expenditure By The EA, 2001-2005 57
28.     Forecast Total Capital Expenditure By The EA, By Core Function, 2001-2005 58
29.     Total Capital Expenditure By The Scottish Water Industry, 1996-2000 59
30.     Forecast Capital Expenditure By The Scottish Water Industry, 2001-2005 61
31.     Capital Expenditure By The WOSWA, 1996-2000 63
32.     Forecast Capital Expenditure By The WOSWA, 2001-2005 64
33.     Capital Expenditure By The EOSWA, 1996-2000 65
34.     Forecast Capital Expenditure By The EOSWA, 2001-2005 66
35.     Capital Expenditure By The NOSWA, 1996-2000 68
36.     Forecast Capital Expenditure By The NOSWA, 2001-2005 69
37.     Capital Expenditure By Northern Ireland Water Service, 1996-2000 72
38.     Forecast Capital Expenditure By Northern Ireland Water Service, 2001-2005 74
39.     Turnover Of The Water And Sewerage Companies Of England And Wales, By Company, 1999 And 2000 77
40.     Ownership Of The WaSCs In England And Wales, 2000 78
41.     Financial Summary Of Anglian Water, 1996-2000 80
42.     Turnover By Anglian Water For Water Supply And Waste Water Services, 1996-2000 81
43.     Capital Expenditure By Anglian Water Services, 1996-2000 82
44.     Forecast Capital Expenditure By Anglian Water Services, 2001-2005 82
45.     Financial Summary Of Hyder, 1996-2000 84
46.     Capital Expenditure By D-r Cymru (Welsh Water), 1996-2000 85
47.     Forecast Capital Expenditure By D-r Cymru (Welsh Water), 2001-2005 86
48.     Financial Summary Of North West Water, 1996-2000 87
49.     Capital Expenditure By North West Water, 1996-2000 88
50.     Forecast Capital Expenditure By North West Water, 2001-2005 89
51.     Financial Summary Of The UK Water Services Activities Of Northumbrian Water Group, 1997-1999 92
52.     Capital Expenditure By Northumbrian Water, 1996-2000 93
53.     Forecast Capital Expenditure By Northumbrian Water, 2001-2005 94
54.     Financial Summary Of Severn Trent Water, 1996-2000 96
55.     Capital Expenditure By Severn Trent Water, 1996-2000 97
56.     Forecast Capital Expenditure By Severn Trent Water, 2001-2005 98
57.     Financial Summary Of South West Water, 1996-2000 99
58.     Capital Expenditure By South West Water, 1996-2000 100
59.     Forecast Capital Expenditure By South West Water, 2001-2005 101
60.     Financial Summary Of Southern Water, 1997-2000 102
61.     Capital Expenditure By Southern Water Services, 1996-2000 103
62.     Forecast Capital Expenditure By Southern Water Services, 2001-2005 104
63.     Financial Summary Of Thames Water, 1996-2000 106
64.     Capital Expenditure By Thames Water Utilities,1996-2000 107
65.     Forecast Capital Expenditure By Thames Water Utilities, 2001-2005 107
66.     Financial Summary Of Wessex Water, 1996-2000 109
67.     Capital Expenditure By Wessex Water Services, 1996-2000 110
68.     Forecast Capital Expenditure By Wessex Water Services, 2001-2005 111
69.     Financial Summary Of Kelda Group 112
70.     Turnover Of The UK Water And Waste Water Services Of Kelda Group, 1996-2000 113
71.     Capital Expenditure By Yorkshire Water, 1996-2000 114
72.     Forecast Capital Expenditure By Yorkshire Water, 2001-2005 115
73.     Turnover Of The Water Only Companies In England And Wales, By Company, 1999 And 2000 117
74.     Financial Summary Of Bournemouth And West Hampshire Water, 1996-2000 118
75.     Capital Expenditure By Bournemouth And West Hampshire Water, 1996-2000 119
76.     Forecast Capital Expenditure By Bournemouth And West Hampshire Water, 2001-2005 120
77.     Financial Summary Of Bristol Water Holdings, 1996-2000 121
78.     Capital Expenditure By Bristol Water, 1996-2000 122
79.     Forecast Capital Expenditure By Bristol Water, 2001-2005 123
80.     Financial Summary Of Brockhampton Holdings, 1996-2000 124
81.     Capital Expenditure By Portsmouth Water, 1996-2000 125
82.     Forecast Capital Expenditure By Portsmouth Water, 2001-2005 126
83.     Financial Summary Of Cambridge Water, 1996-2000 127
84.     Capital Expenditure By Cambridge Water, 1996-2000 128
85.     Forecast Capital Expenditure By Cambridge Water, 2001-2005 129
86.     Financial Summary Of Dee Valley Group, 1996-2000 130
87.     Turnover Of Dee Valley Group, By Class Of Business, 1999 And 2000 131
88.     Capital Expenditure By Dee Valley Water, 1996-2000 131
89.     Forecast Capital Expenditure By Dee Valley Water, 2001-2005 132
90.     Financial Summary Of Essex & Suffolk Water, 1995-1999 134
91.     Capital Expenditure By Essex & Suffolk Water, 1996-2000 135
92.     Forecast Capital Expenditure By Essex & Suffolk Water, 2001-2005 136
93.     Financial Summary Of Folkestone And Dover Water Services, 1996-2000 138
94.     Capital Expenditure By Folkestone And Dover Water Services, 1996-2000 138
95.     Forecast Capital Expenditure By Folkestone And Dover Water Services, 2001-2005 139
96.     Financial Summary Of Hartlepool Water, 1996-2000 141
97.     Capital Expenditure By Hartlepool Water, 1996-2000 141
98.     Financial Summary Of Mid Kent Water, 1996-2000 143
99.     Capital Expenditure By Mid Kent Water, 1996-2000 144
100.   Forecast Capital Expenditure By Mid Kent Water, 2001-2005 145
101.   Financial Summary Of North Surrey Water, 1996-2000 146
102.   Capital Expenditure By North Surrey Water, 1996-2000 147
103.   Forecast Capital Expenditure By North Surrey Water, 2001-2005 148
104.   Financial Summary Of SAUR UK, 1997-1999 149
105.   Turnover For The Water Supply Division Of SAUR UK, 1997-1999 150
106.   Capital Expenditure By South East Water, 1996-2000 150
107.   Forecast Capital Expenditure By South East Water, 2001-2005 151
108.   Financial Summary Of South Staffordshire Group, 1996-2000 153
109.   Capital Expenditure By South Staffordshire Water, 1996-2000 154
110.   Forecast Capital Expenditure By South Staffordshire Water, 2001-2005 154
111.   Financial Summary Of Sutton And East Surrey Water, 1996-2000 156
112.   Capital Expenditure By Sutton And East Surrey Water, 1996-2000 157
113.   Forecast Capital Expenditure By Sutton And East Surrey Water, 2001-2005 158
114.   Financial Summary Of Tendring Hundred Water Services, 1996-2000 159
115.   Capital Expenditure By Tendring Hundred Water Services, 1996-2000 160
116.   Forecast Capital Expenditure By Tendring Hundred Water Services, 2001-2005 160
117.   Financial Summary Of Three Valleys Water, 1996-2000 162
118.   Capital Expenditure By Three Valleys Water, 1996-2000 163
119.   Forecast Capital Expenditure By Three Valleys Water, 2001-2005 164
120.   Financial Summary Of York Waterworks, 1996-2000 165
121.   Capital Expenditure By York Waterworks, 1996-2000 166
122.   Forecast Capital Expenditure by York Waterworks, 2001-2005 166
List of Diagrams
1.     The Water Business Areas In England And Wales, 5
2.     The Water Industry In Scotland, 6
3.     The Water Industry In Northern Ireland 7

Text © 2001MSI

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Last updated by Jacob van Eldik 07th March 2001