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Water industry is working in the public interest

Press release
Industry
1 March 2018

Water companies are putting public interest first and dealing firmly with issues which threaten trust, Water UK Chief Executive Michael Roberts said today (Thursday 1 March 2018).

Speaking in London at Water UK’s main annual event, the City Conference, Mr Roberts said;

“Water is fundamental to all of our lives, and companies fully understand their clear responsibility to act in the public interest. For me, that boils down to doing the right thing in the right way, and tackling issues where they arise, because we want to maintain the high levels of trust our customers have for us.

“We know that they trust us, because more than eight out of ten of them say so in our private polling. We should not lose sight of that as we address some of the issues that critics have raised. The industry is working for water, and that works for our customers.

“The positive sentiment picked up in our polling is reflected in the tens of thousands of conversations which companies are having directly with their customers. These are signs that the fundamentals of our sector are strong. But a sector such as ours can never be complacent.

“Operating in the public interest means operating to the highest standards and constantly aspiring to do better in the face of legitimate challenge. ‘Doing nothing’ is not a viable option.

“Thankfully, I do not believe that ‘doing nothing’ accurately captures the current mood of water companies. In fact, companies are already working with others to reinforce how we operate in the public interest, through our actions and words.”

Mr Roberts went on to address some of the specific issues raised in a letter from Environment Secretary Michael Gove to Ofwat Chairman Jonson Cox, which Mr Cox is expected to reply to by Easter. He said;

“Companies and investors need Government and regulator to be clear in their assessment of the problems. Importantly, where solutions are seen as necessary, they should not undermine the predictability which has been a successful feature of the regulatory regime in England and Wales.

“But the sector itself also needs to be on the front foot, and I think there are reasonable grounds for optimism on that.

“Take the totemic issue of Cayman Islands offshore financial arrangements, legitimately set up in the past to raise funds, but not used to secure a tax advantage.

“All the relevant companies, supported by Water UK, are looking at their arrangements – and three of them - Yorkshire Water, Thames Water and Anglian Water - have publicly pledged to remove them from their structures as soon as they can.

“On leverage, not all companies are highly-geared – but a number of those which are, have started to change that, and Yorkshire Water for one has said it is going further with an aim to reduce gearing to 70% by 2020.

“As for securitisation, a good starting point might be to consider Moody’s recent view that securitisation can support financial resilience – or indeed Ofwat’s own previous statement that ‘customers of securitised companies do not pay more than conventionally financed companies’.

“On the final two perceived concerns flagged in the Secretary of State’s letter – dividends and executive pay – again, the forthcoming update from Jonson Cox should be a good opportunity to establish some facts.

“Whatever the update concludes on these points, I suspect at the very least there is an important job to be done by all concerned to explain fairly and more clearly the approaches adopted by water companies.

“Setting those facts in full context will be especially important – in the case of dividends, for example, by looking at them over a period of time and how they relate to relevant issues such as customers’ bills, company performance and levels of investment.”

The City Conference is one of the most important events in the water sector calendar, bringing together senior industry representatives, the financial industry, regulators and government to discuss the key challenges and issues facing the sector.

As well as the keynote speech by Michael Roberts, this year featured speeches by Environment Secretary Michael Gove MP, Ofwat Chairman Jonson Cox, National Infrastructure Commission Chairman Sir John Armitt, and Kenton Bradbury, Managing Director, Asset Management, at OMERS Infrastructure.

Water UK is the trade body representing all of the major water and wastewater companies in the UK.

Michael Roberts' industry keynote speech is available here.

Water UK Communications
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