South East Water

South East Water is the largest water-only company by regulated capital value in England and Wales. South East Water is a regulated utility and provides water to approximately 2.1 million people within an area covering 5,657 square kilometres in the south of England.

Performance highlights 2008

South East Water generated a return of 7.4 percent for the year and 10.7 percent per annum since inception.

South East Water's revenue for 2007/2008 was £168.7 million, and normalised EBITDA was £102.7 million (normalised to remove one-off merger costs of £3.5 million), which represents an increase of 7.2 percent and 14.6 percent respectively against the published 2006/2007 results(1).

While increased metering and lower summer water consumption had a negative impact on water revenues, higher commercial revenues and reduced operating costs delivered an improved EBITDA result.

Management's focus on execution of the capital expenditure program has delivered excellent results despite adverse weather conditions during the year. Capital expenditure for the full year was slightly ahead of plan.

Following the UK Competition Commission's decision to allow the merger of former South East Water and Mid Kent Water, the companies successfully completed their legal, corporate and financing merger on 14 December 2007.

The year also saw an improvement in the level of service delivered to customers as measured by the regulators performance indicators. Winter rain was sufficient to allow average levels of recharge in most of the company's aquifers and above ground reservoirs are currently reporting higher than typical water levels.

Performance outlook

South East Water has commenced the operational implementation of the merger between South East Water and Mid Kent Water. The various integration work streams are progressing well.

Key elements of the plan for the combined entity going forward include the establishment of an in-house contact centre, centralisation of laboratory functions, merging and rationalising of all support functions and integration of information technology systems.

The next price control review process is underway, with final price determinations to be published in late 2009.

(1)Given that the merger of South East Water and Mid Kent Water did not take place until December 2007, the 2006/2007 revenue and EBITDA numbers used for comparison purposes are the sum of South East Water and Mid Kent Water's published 2006/2007 financials. Differences in accounting policy will mean that the numbers may not be directly comparable.

South East Water
Financial and operational performance

* CAGR: Compound Annual Growth Rate

(1) 2008 figures reflect the merged entity results.  South East Water and Mid Kent Water merged in December 2007.

For more information please visit the South East Water website