Northumbrian Water Finance Plc

PARENT COMPANY DECISION TO PURSUE CMA REFERRAL

Northumbrian Water Limited, the parent company of, and guarantor of bonds issued by, Northumbrian Water Finance Plc, has today released the following announcement:

Northumbrian Water Limited asks Ofwat to refer its PR24 Final Determination to the Competition and Markets Authority

Northumbrian Water Limited (NWL) today (18 February 2025) announced that it has asked Ofwat to refer its PR24 Final Determination to the Competition and Markets Authority (CMA). 

The Board of Northumbrian Water Limited has reached a unanimous decision to seek an independent redetermination of its Ofwat PR24 Final Determination by the CMA.

The company has concluded that the Final Determination does not provide NWL with the necessary means for the successful delivery of its business plan for 2025-2030, which would provide required investment in the long-term resilience of services.

Our PR24 business plan - which was judged to be of a 'high quality' by Ofwat - was informed by extensive consultation with customers, with a clear majority of 74% indicating that they supported it. We designed our plan to be ambitious and stretching, proposing a much-needed step-change in investment to deliver high-quality water and wastewater services, restore ageing assets, and ensure resilience for the long-term in the face of more extreme weather conditions. This is vital to support economic growth and to protect critical national infrastructure and the environment for the future - in line with the Government's wider objectives for the water sector.

We also heard a clear message from our customers that the plan must be mindful of the ongoing cost of living challenges they are facing. That is why our plan retained a strong focus on efficient management of costs. The final Business Plan we submitted combined NWL's largest investment programme ever, with the lowest price rises across the country, resulting in the lowest bills[1], alongside a four-fold increase in support for customers facing cost of living challenges.

However, despite our repeated representations following the Draft Determination, Ofwat has arrived at a Final Determination for NWL that strikes the wrong balance between the need for investment and the pressure on bills. In rejecting NWL's request for £160m on asset health investment[2], the FD represents a misjudgement in the minimum amount of funding needed to adequately ensure the resilience of our assets. It would prevent us from responding to climate change, for example ruling out back up generation at sewage treatment works, increasing the risk of serious pollution incidents.

While we are mindful of any impact on customers[3] in this challenging economic environment, accepting the FD would carry the unacceptable risk of us being unable to deliver the outcomes our customers have told us they want in this AMP and beyond.

Commenting on the decision to appeal, Chief Executive Officer, Heidi Mottram CBE said:

"NWL is proud to have been recognised amongst the highest-performing and most efficient companies in delivering for our customers and protecting the environment[4]. 

Our teams work hard to deliver our customers' expectations, and we will always seek to innovate and go further to ensure that our customers have reliable and resilient water and wastewater services at an affordable cost.[5]  

These priorities are at the heart of the Business Plan we submitted to Ofwat.  Fully supporting our Plan will go a long way towards ensuring we have the ability to invest in the quality of our services and the resilience of our assets, now and into the future.

In particular, the Government has rightly highlighted that "with the frequency of extreme weather events only continuing to rise … decisive action to invest in adapting to climate change has never been more important"[6]. Ofwat has consistently underestimated the impact of climate change on our customers' services, resulting in widespread under funding in its final determinations in 2019 and now again in 2024.

With the prospect of another five years of customer services being negatively impacted by ageing water infrastructure, NWL is seeking a redetermination of our 2024 Business Plan by the Competition and Markets Authority. This is the only option we have left to us to ensure we have the means to appropriately invest in the health and resilience of our assets.

Following an independent review by the CMA, we believe our appeal will result in a redetermination which allows us to implement our investment plans in full. In the meantime, we will continue to make investments to tackle the most pressing issues raised by our customers, such as reducing the operation of storm overflows."

Ends

Media enquiries: [email protected]

Investor enquiries: Matt Williams, Chief Financial Officer, Alex Rutherford, Group Treasurer [email protected]

NOTES TO EDITORS

About

NWL is a wholly-owned subsidiary of Northumbrian Water Group Limited (NWGL), a company registered in England and Wales.  NWL trades in the north east of England as 'Northumbrian Water', supplying water and waste water services to 2.7 million customers, and in the south east of England as 'Essex & Suffolk Water' (ESW) supplying water to 1.9 million customers.

Business Plan highlights

·   This is our largest ever investment programme, with more than £1.7bn (ten times the current approved level) invested into improving the environment.

·    This includes working with partners across our region to improve rivers and habitats, with a further large reduction in spills from storm overflows (investing £1bn).

·    In Essex & Suffolk, we are investing in new water supplies to protect rivers by reducing the amount of water we take from the environment.

·     In the North East we have the lowest bill increase (19.5%) across the sector, and by 2030 we will still have the lowest average bills in England and Wales.

·     Customers supported our business plan - 74% accepted our business plan, and our plans for asset health and climate resilience reflect customer decisions about what they wanted.

Company Performance

·     We are a purpose led business - the most trusted water company in England, and recognised as an ethical business seeking to care for the essential needs of our community and environment, now and for generations to come.

·     We are one of the most efficient companies - the industry leader in innovation, and recognised as the most mature company in managing our assets.

·    We are one of the highest performing companies. We were ranked second in 2023/24, and we are currently outperforming the expectations set by Ofwat in 2019.

·   We have consistently been one of the highest environmental performers (under the EA's star ratings system) - with some of the lowest levels of pollution and some of the cleanest rivers and beaches in the country. However, we know the whole sector needs to do more. We welcome the opportunity for greater investment, and our business plan is the first steps towards meeting our long-term commitments to meet our ambition to restore and regenerate our natural environment.

·     We are the only large water company that Ofwat considers has have met its expectations on dividends and performance related pay.