Interim Management Statement

RNS Number : 4135A

Northumbrian Water Group PLC

01 February 2011

 



1 February 2011

Northumbrian Water Group plc

(the Company or the Group)

Interim Management Statement

The Company today publishes its Interim Management Statement for the period 1 October 2010 to 31 January 2011.  The Board confirms that trading has been in line with expectations and that there have been no material events or transactions during the period.

Both revenues and operating costs are expected to be of a similar level in the second half of the year to those for the first half of the year, reported in our interim results on 30 November 2010.  As highlighted previously, net interest for the year is expected to be around £20 million higher than the prior year, due principally to the impact of higher RPI on index-linked borrowings.

The country suffered its coldest December since records began and the adverse weather has caused delays in the capital investment programme at our principal subsidiary, Northumbrian Water Limited (NWL).  NWL's major investment projects, to expand Abberton reservoir in Essex and build a second advanced anaerobic digestion plant at Howdon on Tyneside, are progressing to plan.  Total Group capital expenditure for the year, net of contributions, is now expected to be around £200 milllion.

The prolonged freeze and subsequent thaw inevitably resulted in an increased number of leaks across our network.  However, we maintained supplies with minimal impact on customers and additional costs were not significant.  In these difficult conditions we are making every effort to achieve our leakage targets for the year.

The Group has a strong funding position; discussions are ongoing to conclude both a new loan facility for NWL from the European Investment Bank and new facilities to replace the £125 million of debt at Northumbrian Services Limited which matures in May 2011.  The Group's cash position at 31 December 2010 was £210 million, which is sufficient to meet the needs of the business to March 2012, taking account of planned new financing.  We are in the process of negotiating committed bank facilities of circa £100 million for NWL which we expect to be in place by 31 March 2011.  Net debt is expected to be around £2.32 billion at 31 March 2011.

The Group operates a defined benefit pension scheme and, in 2006 and 2007, prepaid employers' contributions to the scheme for the period up to 31 December 2010.  We have agreed to make new lump sum contributions to the scheme in respect of the period from 1 January 2011 to 31 March 2015.  Amounts totalling £22.9 million have been paid in the period covered by this statement and a further £47.1 million will be paid in April 2011.  These payments comprise employers' contributions and the deficit recovery funding assumed in the final determination.  A full actuarial valuation of the scheme as at 31 December 2010 has commenced.

As highlighted in our interim results statement, there are some significant reviews and consultations currently underway about the future regulatory structure of the water industry.  The interim findings of Defra's industry review, led by David Gray, concurs with our view that the regulatory system is generally working well and makes a number of suggestions for improvement.  In particular, we welcome the support for regulatory simplification, alignment of price reviews with long term planning and reduced regulatory burden, which is already under consideration by Ofwat.

The Office of Fair Trading (OFT) has announced a market study looking at whether the market for treatment of organic waste is working effectively to deliver the best outcomes for customers.  NWL was an early investor in advanced anaerobic digestion technology for the treatment of sewage to reduce costs and provide a renewable source of energy.  We therefore welcome the OFT review as it should provide the clarity required to inform investment decisions.

Outlook

The Board is confident of maintaining a sound financial performance for the year ending 31 March 2011 and remains focussed on the core business of the Group.

The preliminary results for the year ending 31 March 2011 will be announced on 1 June 2011.

Note:

Information in this announcement is based upon unaudited management accounts.  This announcement includes certain forward looking statements which are based on current expectations and are subject to uncertainties and risks that could cause actual results to differ materially from any expected future events or results referred to in these forward looking statements.  Unless otherwise required  by applicable law, regulation or accounting standard, we do not undertake any obligation to update or revise any forward looking statements, whether as a result of new information, future developments or otherwise.

For further information contact:

Northumbrian Water Heidi Mottram, Chief Executive Officer Chris Green, Finance Director Alistair Baker, Communications & PR Manager	0191 301 6419 0191 301 6851
Pelham Bell Pottinger Archie Berens Zoe Sanders	020 7861 3112 020 7861 3887

 

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