Welsh water firm brims over with confidence

Glas Cymru, the Welsh water company that was the prototype for the Network Rail project planning to take over Railtrack, will reveal this week it has made more money and provided better service than it promised in its first year of operation.

The group, which is a company limited by guarantee, publishes its first year's figures on Thursday. It is expected to announce that it had an underlying surplus on operations of around £25m, ahead of its original forecast of £23m.

This will mean it is ahead of cash targets and is likely to pay a higher-than-expected rebate to Welsh water customers.

Glas, which is chaired by former Treasury mandarin Lord Burns, bought the water business from Hyder when the electricity and water business was sold to an American group after a bitter bid battle during 2000.

Its controversial structure has it run as a virtual company, on the basis that it returns any profit surplus to customers.

In May last year Glas Cymru raised £1.9bn from the City in a bond issue, and made several forecasts about cash generation and profits. All of these will be exceeded. It also said that it would have cash reserves of £340m by 2005. This was revised upwards to £400m last November and is likely to be revised upwards again.

Given this strong performance, Glas may return to the City to refinance the bonds at a lower interest rate.

The group has promised to cut bills by £10 next year and by another £10 in 2004.

That promise will be met, and Ofwat, the water regulator, will confirm that Glas has exceeded its performance targets for service and is doing better by these measures than at any time since water privatisation.