Table of Contents

Executive Summary

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TABLE OF CONTENTS

EXECUTIVE SUMMARY

INTRODUCTION

Definitions

Methodology

The UK Economy

Abbreviations

MARKET SIZE

Water Supply Market

UK Industry Structure

Regulatory Authorities

England and Wales

Scotland

Northern Ireland

CAPITAL EXPENDITURE

Overview

England and Wales

Capital Expenditure, 1992-1996

Overview

Expenditure by the Water Service Companies

Expenditure by the Water Only Companies

Expenditure by the NRA

Factors Affecting Investment

Overview

Legislation

Sources of Finance

Regional Characteristics

Other

Forecast Capital Expenditure, 1997-2001

Overview

Expenditure by the Water Service Companies

Expenditure by the Water Only Companies

Expenditure by the Environmental Agency

Scotland

Overview

Capital Expenditure, 1992-1996

Factors Affecting Investment

Forecast Capital Expenditure, 1997-2001

West of Scotland Water Authority

Overview

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

East of Scotland Water Authority

Overview

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

North of Scotland Water Authority

Overview

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

Northern Ireland

Capital Expenditure, 1992-1996

Factors Affecting Investment

Forecast Capital Expenditure, 1997-2001

OPPORTUNITIES FOR SUPPLIERS

WATER HOLDING COMPANIES

Overview

Anglian Water

Overview

Business Profile

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

Hyder

Overview

Business Profile

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

Northumbrian Holdings

Overview

Business Profile

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

Severn Trent

Overview

Business Profile

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

Southern Water

Overview

Business Profile

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

South West Water

Overview

Business Profile

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

Thames Water

Overview

Business Profile

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

United Utilities

Overview

Business Profile

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

Wessex Water

Overview

Business Profile

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

Yorkshire Water

Overview

Business Profile

Capital Expenditure, 1992-1996

Forecast Capital Expenditure, 1997-2001

WATER ONLY COMPANIES

Overview

Bournemouth and West Hampshire Water

Bristol Water

Brockhampton Holdings (incorporating Portsmouth Water)

Cambridge Water Company

Chester Waterworks Company

Essex and Suffolk Water

Folkestone & Dover Water Services

Hartlepool Water

Mid Kent Water

Mid Southern Water

North Surrey Water

South East Water

South Staffordshire Water

Sutton and East Surrey Water

Tendring Hundred Water Services

Three Valleys Water

Wrexham Water

York Waterworks

TRADE ASSOCIATIONS

REGULATORY ORGANISATIONS

MAGAZINES

List of Tables

1 Economic Indicators On The UK Economy, 1989-1998

2 Public Water Supplied In The UK, 1992-1996

3 Public Water Supplied In The UK, By Region, 1996

4 Reorganisation Of Scotland's Water And Sewerage Industry, 1996

5 Total Capital Expenditure By The UK Water Industry, By Region, 1995 And 1996

6 Total Capital Expenditure By The Water Industry In England And Wales, 1992-1996

7 Total Capital Expenditure By The Water Industry In England And Wales, By Type Of Company, 1992-1996

8 Capital Expenditure By The Water Service Companies In England And Wales, 1992-1996

9 Total Capital Expenditure By The Water Service Companies In England And Wales, By Company, 1992-1996

10 Capital Expenditure On Water Supply, By The Water Service Companies In England And Wales, By Company, 1995 And 1996

11 Proportional Importance Of Capital Expenditure On Water Supply, By Water Service Company And Type Of Service, 1996

12 Capital Expenditure By The Water Only Companies In England And Wales, 1992-1996

13 Capital Expenditure By The Water Only Companies In England And Wales, By Company, 1995 And 1996

14 Proportional Importance Of Capital Expenditure By The Water Only Companies In England And Wales, By Company And Type Of Service, 1996

15 Capital Expenditure By The NRA, 1992-1996

16 Capital Expenditure By The NRA, By Core Function, 1992-1996

17 Average Annual Price Rise Limits Of Water Service Companies, By Company, 1995-2005

18 Average Annual Price Rise Limits Of Water Only Companies, By Company, 1995-2005

19 Forecast Total Capital Expenditure By The Water Industry In England And Wales, 1997-2001

20 Forecast Total Capital Expenditure By The Water Industry In England And Wales, By Type Of Company, 1997-2001

21 Forecast Capital Expenditure By The Water Service Companies In England And Wales, 1997-2001

22 Forecast Capital Expenditure By The Water Service Companies, By Company, 1997-2001

23 Forecast Capital Expenditure By The Water Only Companies In England And Wales, 1997-2001

24 Forecast Capital Expenditure By The Water Only Companies, By Company 1997-2001

25 Forecast Capital Expenditure By The EA, 1997-2001

26 Forecast Capital Expenditure By The EA, By Core Function, 1997-2001

27 Total Capital Expenditure By The Scottish Water Industry, 1992-1996

28 Private Finance Initiative BOO Schemes In Scotland, Signed And Potential, By Water Authority, 1996

29 Forecast Capital Expenditure In The Scottish Water Industry, 1997-2001

30 Capital Expenditure By The West Of Scotland Water Authority, 1992-1996

31 Forecast Capital Expenditure By The West Of Scotland Water Authority, 1997-2001

32 Capital Expenditure By The East Of Scotland Water Authority, 1992-1996

33 Forecast Capital Expenditure By The East Of Scotland Water Authority, 1997-2001

34 Capital Expenditure By The North Of Scotland Water Authority, 1992-1996

35 Forecast Capital Expenditure By The North Of Scotland Water Authority, 1997-2001

36 Capital Expenditure By The Northern Ireland Water Industry, 1992-1996

37 Forecast Capital Expenditure By The Northern Ireland Water Industry, 1997-2001

38 Turnover Of The Water Holding Companies Of England And Wales, By Company, 1995 And 1996

39 Financial Summary Of Anglian Water, 1992-1996

40 Financial Summary Of Anglian Water Services, By Division, 1995 And 1996

41 Capital Expenditure By Anglian Water Services, 1992-1996

42 Forecast Capital Expenditure By Anglian Water Services, 1997-2001

43 Financial Summary Of Hyder, 1992-1996

44 Financial Summary Of Dþr Cymru, By Division, 1995 And 1996

45 Capital Expenditure By Dþr Cymru, 1992-1996

46 Forecast Capital Expenditure By Dþr Cymru, 1997-2001

47 Proportional Importance Of Forecast Capital Expenditure By Dþr Cymru, By Type Of Service, 1996-2000

48 Financial Summary Of Northumbrian Holdings, 1992-1996

49 Financial Summary Of Northumbrian Water, By Division, 1995 And 1996

50 Capital Expenditure By Northumbrian Water, 1992-1996

51 Forecast Capital Expenditure By Northumbrian Water, 1997-2001

52 Financial Summary Of Severn Trent, 1992-1996

53 Financial Summary Of Severn Trent, By Division, 1995 And 1996

54 Capital Expenditure By Severn Trent Water, 1992-1996

55 Forecast Capital Expenditure By Severn Trent Water, 1997-2001

56 Financial Summary Of Southern Water, 1992-1996

57 Financial Summary Of Southern Water Services, By Division, 1995 And 1996

58 Capital Expenditure By Southern Water Services, 1992-1996

59 Forecast Capital Expenditure By Southern Water Services, 1997-2001

60 Financial Summary Of South West Water, 1992-1996

61 Financial Summary Of South West Water Services, By Division, 1995 And 1996

62 Capital Expenditure By South West Water Services, 1992-1996

63 Forecast Capital Expenditure By South West Water Services, 1997-2001

64 Financial Summary Of Thames Water, 1992-1996

65 Financial Summary Of Thames Water Utilities, By Division, 1995 And 1996

66 Capital Expenditure By Thames Water Utilities, 1992-1996

67 Forecast Capital Expenditure By Thames Water Utilities, 1997-2001

68 Financial Summary Of United Utilities, 1992-1996

69 Financial Summary Of North West Water, By Division, 1995 And 1996

70 Capital Expenditure By North West Water, 1992-1996

71 Forecast Capital Expenditure By North West Water, 1997-2001

72 Financial Summary Of Wessex Water, 1992-1996

73 Financial Summary Of Wessex Water Services, By Division, 1995 And 1996

74 Capital Expenditure By Wessex Water Services, 1992-1996

75 Forecast Capital Expenditure By Wessex Water Services, 1997-2001

76 Financial Summary Of Yorkshire Water, 1992-1996

77 Financial Summary Of Yorkshire Water Services, By Division, 1995 And 1996

78 Capital Expenditure By Yorkshire Water Services, 1992-1996

79 Forecast Capital Expenditure By Yorkshire Water Services, 1997-2001

80 Turnover Of Water Only Companies In England And Wales, By Company, 1995 And 1996

81 Capital Expenditure By Bournemouth & West Hampshire Water, 1992-1996

82 Forecast Capital Expenditure By Bournemouth And West Hampshire Water, 1997-2001

83 Capital Expenditure By Bristol Water, 1992-1996

84 Forecast Capital Expenditure By Bristol Water, 1997-2001

85 Capital Expenditure By Portsmouth Water, 1992-1996

86 Forecast Capital Expenditure By Portsmouth Water, 1997-2001

87 Capital Expenditure By Cambridge Water Company, 1992-1996

88 Forecast Capital Expenditure By Cambridge Water Company, 1997-2001

89 Capital Expenditure By Chester Waterworks Company, 1992-1996

90 Forecast Capital Expenditure By Chester Waterworks Company, 1997-2001

91 Capital Expenditure By Essex And Suffolk Water, 1992-1996

92 Forecast Capital Expenditure By Essex And Suffolk Water, 1997-2001

93 Capital Expenditure By Folkestone And Dover Water Services, 1992-1996

94 Forecast Capital Expenditure By Folkestone And Dover Water Services, 1997-2001

95 Capital Expenditure By Hartlepool Water, 1992-1996

96 Forecast Capital Expenditure By Hartlepool Water, 1997-2001

97 Capital Expenditure By Mid Kent Water, 1992-1996

98 Forecast Capital Expenditure By Mid Kent Water, 1997-2001

99 Capital Expenditure By Mid Southern Water, 1992-1996

100 Forecast Capital Expenditure By Mid Southern Water, 1997-2001

101 Capital Expenditure By North Surrey Water, 1992-1996

102 Forecast Capital Expenditure By North Surrey Water, 1997-2001

103 Capital Expenditure By South East Water, 1992-1996

104 Forecast Capital Expenditure By South East Water, 1997-2001

105 Capital Expenditure By South Staffordshire Water, 1992-1996

106 Forecast Capital Expenditure By South Staffordshire Water, 1997-2001

107 Capital Expenditure By South And East Surrey Water, 1997-2001

108 Forecast Capital Expenditure By Sutton And East Surrey Water, 1997-2001

109 Capital Expenditure By Tendring Hundred Water Services, 1992-1996

110 Forecast Capital Expenditure By Tendring Hundred Water Services, 1997-2001

111 Capital Expenditure By Three Valleys Water, 1992-1996

112 Forecast Capital Expenditure By Three Valleys Water, 1997-2001

113 Capital Expenditure By Wrexham Water, 1992-1996

114 Forecast Capital Expenditure By Wrexham Water, 1997-2001

115 Capital Expenditure By York Waterworks, 1992-1996

116 Forecast Capital Expenditure By York Waterworks, 1997-2001

List of Diagrams

1 The Water Business Areas In England And Wales, 1996

2 The Water Industry In Scotland, 1996

3 The Water Industry In Northern Ireland, 1996

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EXECUTIVE SUMMARY

In the 1996 financial year, capital expenditure by the UK water industry increased by 4 percent to £3.1 billion. This reflected the commitment of the water companies to invest in reducing leakage levels and improve the performance of distribution systems following the drought of 1995. In addition, the increase represents the release of pent up demand following the Office of Water Services' Periodic Review and continuing investment in meeting EU legislative requirements.

The water companies and the National Rivers Authority (now incorporated in the Environmental Agency) in England and Wales continued to account for the largest proportion of UK water industry investment in the year to March 1996, constituting some 89 percent of the total.

In the 1996 financial year, the water service companies continued to account for the majority of capital expenditure in England and Wales, representing 86 percent of the total. Their commitment to supply both water and sewerage services, combined with the large size of the regions and the associated populations which they serve, reflects this high level of investment. Water only companies, in contrast, are only responsible for supplying water services in comparatively smaller regions, and subsequently, they accounted for just 9 percent of the investment in the water industry in England and Wales during the same year. The National Rivers Authority accounted for the remaining 5 percent of investment in this sector during the year to March 1996.

Legislation, sources of finance, regional characteristics and public opinion are among the principal factors that affect the level and distribution of capital expenditure in the English and Welsh water industry. The European Drinking Water Directive was the main impetus for investment during the early 1990s for the water companies. Although this legislation will continue to necessitate further investment to remove pesticides and nitrates, the following will also require considerable investment:

- revised legislation on lead levels which will involve replacing lead pipes by 2005

- European requirements on bathing water quality and waste water treatment

- reduction of leakage levels from the distribution system

- sewer renovation and renewals

MSI forecast that total capital expenditure by the water industry in England and Wales will increase by 16 percent in the 1997 financial year. This is expected to reflect the considerable commitment by the water companies to reduce leakage levels from distribution systems as set out in their target plans to the industry regulator. Pent up demand is also expected to be released following the Periodic Review and delays due to corporate restructuring. Additionally, water service companies are having to fulfil European legislative requirements to meet the 1998 deadline for the total ban on sludge disposal at sea. This will lead to many companies weighting investment programmes towards the first half of the forecast period. Consequently, capital expenditure is expected to decline gradually from 1998 until the end of the forecast period.

In the Scottish and Northern Irish water industries, capital expenditure reached a value of £341.1 million in the year to March 1996, representing a decline of 4 percent in investment compared to 1995. Investment in the Scottish water industry declined by 8 percent during the year, whereas investment in the Northern Irish water industry increased by 6 percent during the year.

The decline in investment in the Scottish water industry was principally caused by the plans to restructure the industry. Three new Water Authorities were created in April 1996 from the twelve former regional and island councils. On the same date, the Northern Ireland Water Service became an Executive Agency of the Department of the Environment. Privatisation continues to be a major issue in the Northern Ireland water industry, however, the plans of the Labour Government were still unclear at the time of writing. The increase in investment can be attributed to the upgrading of treatment works and efforts to meet European drinking water requirements.

MSI forecast that capital expenditure by the Scottish water industry will decline by 5 percent in the year to March 1997. This is expected to reflect the further delay of capital projects in Scotland caused by the authorities seeking private funding, and by the restructuring of the industry. Investment in the 1988 financial year is expected to increase by as much as 39 percent due to the individual authorities focusing investment on meeting European waste water requirements. Capital expenditure by the Northern Ireland water industry is forecast to decline gradually in real terms between 1997 and 2001 assuming that there are government spending cutbacks on water activities.

Text © 1997 MSI

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