Kevin Whiteman: He came through the miners' strike in '85 but now for the great water revolt of 2005

Sipping at an 'Icytonic', Kelda's chief executive tells Tim Webb why his glass isn't half empty despite higher charges and City criticism

Kevin Whiteman, the chief executive of utility group Kelda, prefers water to coal - and not just because his company is the owner of Yorkshire Water. The Dustin Hoffman lookalike from South Wales started off his career at British Coal, where he worked for 17 years. He became manager of his first colliery just before the 1984-85 miners' strike (he was not a member of the National Union of Miners at the time, he says) when the pit was closed as a result.

Kevin Whiteman, the chief executive of utility group Kelda, prefers water to coal - and not just because his company is the owner of Yorkshire Water. The Dustin Hoffman lookalike from South Wales started off his career at British Coal, where he worked for 17 years. He became manager of his first colliery just before the 1984-85 miners' strike (he was not a member of the National Union of Miners at the time, he says) when the pit was closed as a result.

"The nice thing about water is that there is no way of replacing it with anything else," he reflects, speaking at Kelda's offices just outside Bradford. "People always use water but the market for coal started to disappear back then."

It's reassuring to know that he is not worried about Tony Blair shutting down the water companies as Margaret Thatcher did the mines in the 1980s. But 20 years after the miners went on strike, Whiteman could have another revolt on his hands - this time from utility customers. Last month Yorkshire Water got approval from Ofwat, the water regulator, to raise bills by 18 per cent (on top of inflation) over the next five years from April. The average annual charge for Yorkshire households at the moment is £243, so by 2010 they will be forking out another £45 (before inflation). Is he worried about customers' reaction?

"You have to put the price rises in perspective," he says. "They are not insignificant but they are not of the same nature as the poll tax. There has been very little negative response. Of course, there will be some complaint."

Most water companies will be increasing prices by similar amounts - in fact, Kelda asked for the lowest rise (21 per cent). "We always thought it was a good plan," says Whiteman. "The regulator thought we got it about right. We did not want to play 'bid high' and expect the regulator to cut us game."

Whiteman is at pains to stress to Yorkshire Water's 4.7 million customers that he is not happy about the price rises, and he points the blame at Brussels. New European directives require the British water industry to spend around £18bn replacing ageing mains, lowering lead levels in drinking water and investing more in sewage treatment to improve sea and river water quality.

"If it had not been for enhanced- quality investment, which is driven by EU legislation, and changes in the tax regime, prices could have remained static or gone down because of efficiencies," he says. "I am not trying to say to customers that it is good news. But I want them to understand so that they don't perceive us to be profiteering."

The charge of profiteering is a particularly sensitive one in Yorkshire. In 1995, during a summer drought, the company told customers not to have baths (the managing director was later photographed sneaking off to a relative's house in another water company's area to have a bath himself). Later in the same decade, it was embroiled in a "fat cat" row over the level of remuneration for directors.

"It was not the most auspicious period in the company's history," Whiteman admits. "We took a hammering in PR terms. But we think our reputation is improving and has improved."

He seems to have mixed feelings about the EU rules. Is it worth spending billions of pounds to improve water quality by another 0.1 per cent? In some cases, the answer seems to be no.

"There are certain elements in the legislation where you think it is getting to the point of the law of diminishing returns in terms of benefit compared with spend." On some issues, such as the EU Fresh Water Fisheries Directive, the company has asked the Environment Agency if it can implement the rules in a different way.

But, as a keen trout fisher, Whiteman can also see the benefits. "There have been massive environmental improvements in rivers and beaches. What you see is the growth in fish stocks. We should be proud of it."

As proud, perhaps, as the company is of its product. For with the unveiling last October of "Icytonic" (that's tap water, to you and me), Yorkshire Water became the world's first supplier to trademark its own water. The drink, so named because it is "best served chilled", does not yet enjoy universal recognition. Go into a restaurant in Leeds and ask for a jug of "Icytonic" and you are likely to get blank looks.

And anyway, how do we know it's not a glass of Evian? "God forbid it's another brand," jokes Whiteman.

Despite such innovations, he remains a traditionalist at heart, which probably explains why Kelda has the lowest borrowing levels of all the big water companies (49 per cent debt-to-equity, compared with AWG, for example, which has around 70 per cent). This has attracted criticism from some City analysts, who say debt is the cheapest way of raising money (rather than going through the equity markets), but Whiteman won't succumb to whizzy balance sheets. "Whether ours is the most efficient structure is open to debate," he concedes. "If you're asking me would I go down the highly leveraged route, the answer is no. It is not balanced, and there is more risk than one should carry in a water firm. If you are not careful, it is the customers who will end up paying."

As well as enabling the company to pay for any emergency repairs if its pipes or facilities fail, having relatively low levels of debt gives Whiteman "options", which include raising the dividend or buying back shares. Bidding for other water firms is a further option, possibly in the US, where Kelda already owns Aquarion, based in Connecticut.

Then again, the acquisition trail could begin at home, because buying other UK water companies - previously blocked on competition grounds - is now theoretically possible under the Enterprise Act.

"Someone will at least test the new regime," Whiteman says. "That will dictate whether further consolidation takes place." Would Kelda be tempted? "If consolidation were to become a reality, we would have an interest in being part of that. There is nothing on our agenda. Let's see what time brings."

But he is fed up being asked whether he is interested in buying neighbouring Northumbrian Water - the answer is no.

"Some consolidation would be a good thing for the industry," he continues. "Any vibrant dynamic industry needs options for change and to move forward. At the moment it is just different forms of ownership structure, not different shapes of companies."

Whiteman is a modest chap. "I don't believe in the 'chief executive is hero'-type model," he says. "I don't believe in the cult of personality." But if he can pull off the trick of keeping customers happy, the regulator happy and the City happy, you suspect his next trick will be to walk on water.

BIOGRAPHY

Born: 12 December 1956.

Education: University College, Cardiff - BSc (first class), mining engineering.

Career (1977-93): British Coal, colliery management.

1993-96: Regional director and then chief executive of the National Rivers Authority.

1996-97: Environment Agency, regional director.

1997-2000: director, Yorkshire Water.

2000-02: managing director, Yorkshire Water.

2002 to now: chief executive, Kelda.

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