Anglian 'happy' with price control: 'Nothing to fear' from Ofwat plans to clamp down on profits and make companies lift efficiency

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The Independent Online
ANGLIAN Water, whose capital expenditure programme is one of the industry's highest, says it has nothing to fear from plans by Ofwat, the industry watchdog, to clamp down on profits.

Alan Smith, managing director of Anglian, which yesterday reported interim results almost unchanged at pounds 100.5m, said he was perfectly happy with Ofwat's latest announcements on setting new price controls.

Last week Ian Byatt, the director- general of Ofwat, gave notice of his aim to keep price rises as low as possible and make companies pay for improved services and higher dividends through increased efficiency.

Analysts said it did not bode well for companies with large investment plans because they would be looking for a high 'K' factor - allowable price increases - when individual pricing formulae were fixed.

But Mr Smith welcomed Ofwat's intention to allow each regional water company to negotiate specific areas of investment and pricing. 'It is quite clear that Ofwat has not slammed the door. It has left the door ajar,' he said.

Anglian's capital spending programme will reach pounds 380m this year, up 16 per cent. One analyst said only North West and South West Water have higher investment plans, but he added that Anglian was in a good position to enter the price-setting review.

Anglian's 0.3 per cent profit rise in the half-year to 30 September came on turnover up 19.2 per cent to pounds 341.4m, which included the first full six months' contribution from Nordic, a Swedish waste engineering group bought last February for pounds 36m. Mr Smith said Nordic broke even in the first half, and should move into profit in the second. In July, Anglian formed a joint venture with American Water Works, the largest utility in North America. 'We see Nordic and the US venture as two areas for serious long- term growth,' Mr Smith said.

Operating profits of pounds 118.7m in the core business were only pounds 2.7m up, because of lower industrial and commercial consumption. The company said: 'It is clear that many organisations are still affected by the recession and are increasingly turning to water conservation and recycling measures to reduce their water bills.'

Mr Smith called for government aid for households that will be significantly worse off because of the introduction of water meters. More than 100,000 of Anglian's 1.3 million domestic customers have meters. Although about 60 per cent of customers would see little difference in bills, Mr Smith admitted that some people could be hit hard. But he said meters were a fairer way of assessing bills, and the worse-off should be addressed by higher state benefits.

Provisions of pounds 113.8m included pounds 111m for maintaining Anglian's underground sewer network. Net borrowings were pounds 423.8m. The interim dividend is 7.3p (6.8p).

(Photograph omitted)