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 2011

South East Water's revenue for 2010/2011 financial year ended 31 March was £190.0 million, and normalised EBITDA was £119.4 million, which represents an increase of 5.3 percent and 4.8 percent respectively compared to the previous corresponding period.

The increase in revenue reflects the increase in the Retail Price Index of 0.3 percent (between November 2008 and November 2009) combined with an allowed price adjustment factor of 4.4 percent. The increase in revenue combined with tight control of operating costs resulted in a strong EBITDA result.

The capital expenditure program for the five year regulatory period to March 2015 (AMP 5) remains on target. Capital expenditure in 2010/2011 totalled £77.5 million, which is £1.4 million higher than the regulator's AMP 5 Final Determination and £1.0 million less than the South East Water budget. The capital work undertaken throughout the year has ensured that South East Water has achieved its leakage target despite very harsh winter weather.

The year saw continued pressure on South East Water's cash collections. The company has taken steps to improve its performance in this area and was pleased to complete the financial year within 0.6 percent of budget. In the context of the continuing challenging economic environment, this is a strong result.

Following the public inquiry into South East Water's Water Resource Management Plan (WRMP), permission was received from the Secretary of State in November 2010 to publish its WRMP in its entirety. This is positive news for the business as the inquiry was the final hurdle preventing South East Water from commencing its universal water metering programme (UMP), a key part of the AMP 5 capital program. Meter installation commences from July 2011. The program is expected to take nine years.

South East Water successfully replaced its £100 million revolving credit facility that was due to expire in August 2011 with a new five-year £90 million revolving credit facility on 14 June 2011. The terms of the new facility were better than expected and had a positive impact on value. The facility provides liquidity headroom and will be used to fund capital expenditure in 2012/2013 should market conditions make it preferable to delay raising funds from the bond markets.

Performance outlook

Revenue and EBITDA for 2011/12 continues to track ahead of budget. The company is focused on delivering operating efficiencies and achieving the targets set by the regulator for the current five-year regulatory period.

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.
Note: Figures may differ slightly from previously reported information due to the timing of the completion of the audit of both statutory and regulatory accounts.

For more information please visit the South East Water website.