Highlights of the year

Economic Sustainability

South West Water delivered a robust set of financial results in 2010/11. Profit before tax was broadly stable at £128.9m compared with £129.5 in 2009/10, despite the industry-wide reduction in the allowed rate of return.

As well as achieving this level of profit the Company invested £125.1m in capital expenditure - broadly stable compared to the previous year after adjusting for non-recurring items - and improved its gearing ratio (relationship of net debt to the regulatory capital value) from 59% to 57% as a result of strong cash flow performance.

Another strong year of operational performance accompanied the financial results:

  • no hosepipe restrictions or drought orders for the 14th consecutive summer with no water restrictions envisaged for summer 2011
  • the Ofwat leakage target being met again (it has been met or beaten every year since inception) despite the coldest December in England in the last 100 years
  • near perfect water quality
  • reliability resulting from our operating assets again achieving a consistent 'stable serviceability1' rating
  • a reduction by over a quarter in the number of written complaints received.

With the start of the new five year regulatory period that runs from 2010 to 2015 ("K5" period) we introduced an innovative 'mixed economy' model to source our £705m2 capital programme. This means using a significant number of smaller local contractors to provide specialised services as well as long-term relationships with more major supply chain partners.

During the year we have provided extensive input to the debates about how economic regulation for the sector should be developed and the role of market reform in those developments. Key themes for us have been:

  • regulatory mechanisms should encourage and reward innovation and sustainability
  • reduction in the regulatory burden at the same time as protecting customers' interests
  • market reform proposals must make sense in terms of customer service, prices and cost benefit analysis
  • tackling fairness and affordability charging issues for the South West.

Environmental sustainability

Of the 144 designated bathing waters in our region, 139 or 96.5% met good (mandatory), and 130 or 90.3% met the European excellent standard (guideline). This is an improvement on last year's results, when 121 or 84.0% met the excellent (guideline) standard. All the region's 18 Blue Flag beaches retained their European excellent status and 4 other local beaches could also reapply, having returned to excellent status. The exceptional results in Cornwall, with just one bathing water failing the good (mandatory) standard, are particularly pleasing, given the importance of the tourism industry to the county.

We have continued to make good progress on our 'Upstream Thinking' strategy which aims to improve river water quality in a sustainable way. A five-year pilot project to carry out restoration on areas of internationally important blanket bog on Dartmoor was launched. The project is a partnership led by Dartmoor National Park Authority and funded substantially by South West Water. The ongoing partnership work to restore wetlands on Exmoor has been recognised with a national Golden Green Apple Award.

We achieved a further 3.1 GWh energy saving through initiatives introduced across the business such as the 'PowerDown' programme.

We generated 13.8 GWh - enough to power around 3,000 homes - from capturing and processing methane gas from our digestion plants and waste water treatment works and from our hydro electric power plants. Our long-term aim remains to source 50% of our energy used from renewable sources by 2030.

We received certification under the Certified Emissions Measurement and Reduction (CEMARS) scheme for our carbon reporting: this is independently assessed and can only be achieved by organisations that have not only made credible emissions reductions over the past three years but also have robust carbon reduction plans for the future.

We have reduced our carbon footprint for the third successive year. Our longer term aim is to match the UK Government's carbon reduction targets. It is our aspiration to achieve an 80% reduction in our emissions by 2050 (on a 2006/07 baseline).

Support for domestic customers

Support for domestic customers

Social sustainability

We have been enthusiastic to promote practical ways to help customers struggling to pay their water bills through:

  • the WaterCare Scheme which has helped over 8,000 customers with long-term debt problems
  • the Restart Scheme which has helped over 6,000 customers to reduce their debt
  • the Fresh Start Fund, managed by an independent board, for one-off hardship cases
  • a targeted campaign to promote and support low income customers who would benefit from metering
  • fitting 5,000 free leak alarms for vulnerable customers wary of metering
  • providing training and administration resource to the Citizens Advice Bureau
  • employing doorstep debt advisors to provide advice and access to support schemes
  • implementing WaterSure tariff with more than 9,800 households on this tariff, one third of the national total.

South West Water has welcomed the Government's response to the Walker Review of charging for household water and sewerage services. The proposal for Government from 2013/14 to fund a cut in the average bill of all customers will be especially well received alongside proposals to target help at those in most need by funding the 'Water Sure' tariff, pegging it to the lower national average metered bill and allowing us to develop our own social tariff. We will continue to work closely with Government and our regulators throughout the consultation period to examine the practicality of all options to aid customers.

South West Water's emphasis on excellent service is delivering tangible improvements for customers and is reflected in reducing levels of contacts, particularly repeat contacts. Customer satisfaction levels are also rising. Service improvements undertaken in the past two years to reduce customer complaints are delivering results, with complaint levels falling for the third year running.

We have continued to support and sponsor community projects linked to water, the environment, youth participation and education in the South West, and overseas via the national water charity, WaterAid.

Overall, a year of good performance provides a robust platform for the delivery of our plans for K5 and beyond with the continued emphasis on sustainability and corporate responsibility.

1Serviceability is the capacity of a system of assets to deliver a reference level of service to customers and to the environment now and into the future. Serviceability is deemed to be stable when the assessment of trends in a defined set of service and asset performance indicators demonstrates that service is in line with the reference level of service and, by inference, is likely to remain so into the future.

2At 2007/08 prices.