201 million spent in first six months of 2022-23 to improve services

13 November 2023

Dŵr Cymru Welsh Water spent £201 million between April and September 2023 in capital projects to improve services and support the resilience of its water and wastewater network spanning most of Wales and Herefordshire - £32 million more than the same period last year.

This includes phosphate reduction schemes to improve river water quality at Brecon (River Usk) and Hereford (River Wye) and schemes to mitigate climate change risk, such as starting construction of the new spillway at Llyn Celyn dam, in north Wales.

In its half-year report, the company reported strong financial performance but also identified some key operational areas where its performance is behind target, including the length of time customers experience interruptions to water supplies, levels of leakage and the number of pollution incidents. The company also confirmed that its ‘Cymuned’ (Community) scheme, aimed at supporting working customers who are struggling financially and need short-term help with their bill, has now been rolled out across its operating area, the first scheme of its kind in the water industry.

Welsh Water has previously confirmed that as its “not for profit” ownership model means it doesn’t have to pay dividends to shareholders, it is able to make available £13 million funding this year to support its most vulnerable customers via its social tariffs.

The half-year report comes after the company submitted to Ofwat in early October its ambitious Business Plan for 2025-30. If approved, this plan will result in the company’s biggest ever capital expenditure programme, worth £3.5 billion over the five years, equivalent to a 68% increase on the capital expenditure in progress between 2020 and 2025.

A key focus of the Plan is to adopt a collaborative approach to reducing its impact on the environment, in particular playing its part in helping improve river water quality, with a commitment to invest nearly £2.0 billion in the environment across 2025 to 2030 – 84% more than during 2020-25. The company is also undertaking its largest intake of new talent into the business with over 50 apprentices, graduates and trainees joining in the next six months.

Glas Cymru Chairman Alastair Lyons said: “We have maintained our strong financial position over the first six months of the year, giving us a stable foundation on which to improve our operational performance and for the delivery of our longer-term Business Plan. We remain completely focussed on delivering a good service for our customers and the environment, and we will not shy away from the challenges we face. Work is already underway to tackle those areas where we are behind the pace, supported by detailed investment plans both in this current regulatory cycle as well as in 2025-30. Sustained investment will be needed to build the infrastructure our customers deserve.”

Welsh Water Chief Executive Peter Perry said: “Our investment programme for the past 6 months has reached record-high levels and as an anchor company here in Wales, we are proud that we are delivering the substantial infrastructure investment that will help protect and strengthen our key services for years to come while supporting over 9,000 jobs, directly and indirectly.

“At the same time, we also remain acutely focused, in collaboration with other sectors, on delivering environmental improvements. As a company, our performance continues to be scrutinised by customers and stakeholders and rightly so. We are privileged to provide an essential service that protects public health and despite the challenges we face, our foundations, company ethos and people remain strong and fully committed to protecting and supporting the communities we serve.”

Key results include:

  • Revenue increased by 8% to £464 million (2022: £428 million), principally reflecting bill increases, higher consumption, and customer growth over the past 12 months.
  • Operating expenditure (excluding impairment of trade and other receivables, infrastructure renewals expenditure, and depreciation) increased by 2% to £182 million (2022: £179 million) reflecting higher employment costs and chemical prices.
  • Operating profit increased by 12% to £37 million (2022: £33 million).
  • Net capital investment totalled £201 million (2022: £167 million) and is in line to achieve.
  • £2.0 billion AMP7 (2020 to 2025) investment programme of improvements to the environment and customer service.
  • The underlying loss (excluding fair value movements) for the period was £86 million (2023: £93 million) reflecting the movements noted above, as well as net finance expense of £124 million incurred during the period.
  • Overall compliance with the Drinking Water Inspectorate Compliance Risk Index (CRI) this calendar year at 6.33 is adverse to target (3.38) (2022: 4.12) largely due to a failure at our largest treatment works at Felindre where we are undertaking £16 million of complex maintenance to ensure we maintain good water quality standards.
  • Overall waste treatment works compliance at 98.16% was slightly below target (99.16%) due to a challenging start to the year, with a number of works suffering operational problems in the dry spring. Performance has stabilised over summer and into the autumn.
  • In terms of leakage, this remains behind target which is expressed as a 3-year average: on this basis, Welsh Water outturned an increase in leakage of 14.3% compared to its target of a 10.4%increase. It experienced a number of large trunk main failures and also repeated mains failures in rural locations, particularly in South West Wales where it can be difficult to locate and access burst mains. The company remains optimistic that its Leakage Recovery Plan will provide performance improvements and have proposed a major programme of mains replacement as part of our PR24 submission.
  • Welsh Water generated 25% of its own energy needs through wind, hydro, solar and advanced anaerobic digestion (AAD) with the rest procured from 100% renewable energy resources. By 2025 the company aims to generate 35% of its energy as it continues to switch to self-generation of renewables in its drive to be 100% by 2050.
  • Under our Water Resilient Communities Project (a place-based approach aimed at bringing together colleagues from different teams - vulnerable customer, education, career, debt, water efficiency and wastewater network – to provide targeted support in a certain area), our Education Team joined forces with the Literacy Trust and the Eden Gate Centre to support adults with learning difficulties to improve their reading and spelling, thus making it easier for them to access other support services.

The full Glas Cymru interim report and accounts can be found here.