Anglian Water attacks Byatt for price cut
Wednesday 04 November 1998
Robin Gourlay, chairman of the privatised water company, said proposals by the regulator Ofwat for a 17.5 per cent drop in its average bills from 2000 - published in a consultation paper last week - were "undesirable".
Anglian Water faced the heaviest drop in prices in the sector and would "argue forcefully" for a change to the proposals. However, Anglian's broadside against Mr Byatt was dealt a blow when Thames Water, the UK's largest water company, criticised its rival's aggressive approach.
Sir Robert Clarke, the Thames chairman, said that although the London and South-east-based company faced cuts of 10 to 15 per cent and agreed with the substance of Anglian's comments, it did not want to be embroiled in a public row with Mr Byatt. "We believe the right way to handle this is to engage in private discussions with the regulator," Mr Clarke said.
Anglian Water claimed that the cuts proposed by Ofwat would wipe about pounds 130m from its profits and turnover in 2000 and 2001. Last year, the company, which has about 5 million customers between the Thames and the Humber, posted a pre-tax profit of pounds 274m.
Chris Mellor, the group managing director, said that because of the high level of fixed costs, Anglian would not be able to offset the drop in revenues through greater cost savings for at least two years.
The collapse in revenue would severely impact interest cover and would make it difficult for Anglian to borrow to finance its investment in pipes and leak-reduction systems.
"[Mr Byatt's plans] could have some particularly serious implications for the company," said Elliott Mannis, the finance director.
The company will argue that the proposals would lead to a jump in prices after 2000, wiping out the benefits to customers of the initial cut. Anglian is to push Mr Byatt, who will publish a five-yearly price review in 1999, to accept a lower one-off cut in 2000 and smaller price increases after that.
The comments came as Anglian posted a 20.3 per cent fall in interim profits to pounds 112.8m and admitted that it would not meet Ofwat's leakage target of 205 million litres a day in the current year.
Thames Water, which serves around 12 million customers, posted slightly higher interim earnings of pounds 207m before exceptionals. Shares in Thames rose 3p to 1,124p. Anglian dropped 15p to 842p.
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