Flood spending aids Thames chief

THAMES WATER is spending millions of pounds to stop homes in the London area from being flooded by sewage after violent rainstorms. One of the recent victims of a sewage flood was the company's deputy chairman, Sir Christopher Leaver, whose Chelsea home was badly affected by sewage backing up into the basement.

The spending is part of a pounds 100m discretionary investment programme announced yesterday by Thames to improve water supplies in the South-east.

Thames has so far removed the threat of sewage flooding from 1,300 properties in its area. The company declines to say how many more homes are under threat or how many cases it deals with in a year.

Other additional measures to improve water supplies include extra spending on the ring main outside London. The company is also opening up old wells in the capital to relieve the problem of rising levels of ground water which are threatening to flood parts of the London Underground network.

The extra pounds 100m investment came as Thames announced a pounds 300m special payout to shareholders through an issue of B shares, a 9 per cent increase in operating profits to pounds 481m and an 11.6 per cent rise in the dividend.

Thames also pledged that this summer would be the seventh consecutive year free of water restrictions, adding that it was ahead of the leakage reduction targets set by the water regulator Ofwat.

In readiness for the review of domestic water charges in 2000, which is likely to see a big one-off cut in water bills, Thames is seeking to increase profits from its non-regulated, international business.

Profits from non-regulated activities increased by a third last year to pounds 45m and now account for 10 per cent of overall group profits. Thames is targeting a doubling of the contribution from non-regulated activities to 20 per cent in the next five years.

Overall investment was pounds 471m last year and is expected to reach pounds 500m, bringing the total invested since privatisation to nearly pounds 4bn.

Thames said its own customer surveys showed that consumers were overwhelming in favour of increased investment with more than 90 per cent saying they would prefer improvements in water quality and supply to reduced bills.

The pounds 300m capital distribution together with the second tranche of the windfall tax and capital spending commitments will lift gearing from 51 per cent at present to 80 per cent. Thames said it aimed to reduce dividend cover from 2.5 to 2 times.