Investment boost continues at United

Full year results from Untied Utilities for 2016-17 included an Outcome Delivery Incentive (ODI) reward net of penalties at £6.7m boosted by continued acceleration in investment over its final determination assumed profile.

A net penalty under its water ODIs of £2.8m was countered by a net reward of £9.5m in its wastewater incentives. Investment in 20116-17 was its second year in which capital expenditure was at £800m. Final determination assumption for the year was about £690m. The company unveiled £100m in planned added expenditure to be phased over remainder of the price control period with £20m earmarked for next year when assumed investment and actual will be all but equal.

United’s ODI are significantly skewed to the downside but it reported a further decrease in the downside risk from £70m last year to £50m in 2016-17 with upside static at £30m

The company posted no Return on Regulatory Equity figures. Utilities analyst, Lakis Athanasiou, at Agency Partners estimated RoRE at 5.8% and anticipated a surge over the last two years of the price control period when investment will fall significantly below assumptions.

United posted company record Service Incentive Mechanism (SIM) scores. Its qualitative SIM score placed it second among the water and sewerage companies, third overall while its quantitative score was the best of the water and sewerage firms and second overall.

Underlying operating profit was up £19m to £623m on revenues off £26m at £1.704bn. Reported operating income was up £37.6m to £605.5m largely due to costs associated with a water quality incident in the previous year.

Underlying profit before tax was down £19m on the previous year at £389m due to a £36m increase in financing expenses following increased inflation. Reported pre tax income was up £38m to £442m due to boosted operating income, movements in derivatives and profit on disposal relating to the Water Plus business retail joint venture with Severn Trent Water.