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The largest water defender in the UK has promised guarantees of investor income, without minimal competition and risk as he tries to go more than £ 50 billion for projects to address water shortages.
Investors will have “the right to collect” customer income, “head opportunities”, “closed liabilities” and “positive investment” support from the government, according to a first Financial Times informative letter.
The document, presented to investors at a conference in the London Office of the Jefferies Investment Bank last Friday, adds that there is no “exposure to competitive or market risks” – referring to the fact that there is no change in the demand for water infrastructure.
Investing with as many as £ 50 billion is needed to support about 30 new projects to improve Britain’s destroyed infrastructure over the next 15 years. Already approved by ofWat, projects include reservoirs, treatment works and water transfer schemes. Most of these will be submitted through private finance schemes and will be paid mainly through an additional addition to customer bills.
This is controversial because water companies have become a lightning rod for public anger after a number of financial issues, sewage flow and supply interruptions, as well as a sharp increase in household bills.
Ofwat, which oversees the 16 private water and sewerage companies in England and Wales, has a legal task of protecting consumer interests, “wherever it is appropriate by promoting effective competition”. It also has a duty to ensure that water companies can finance their activities.
The new infrastructure aims to address a predicted water deficiency of nearly 5bn liters per day by 2050, according to the ofwat. The Environmental Agency has warned that the driest spring in 69 years has left the country at risk of drought this summer.
Investors, including Agilia, Equitix and Aviva infrastructure partners, participated in Friday conference according to Ofwat.
Projects will sit outside the usual regulatory process of setting five years, will have their own management teams and in some cases will be paid throughout the construction period. Investors will either be paid through an addition to customer bills during a license period of about 25 years or for the whole life of the project.
Ofwat argues that there are measures to protect clients and that the creation of separate private funded vehicles will reduce costs. But the additional tariffs are likely to worry about consumers, who have already faced an average invoice growth about 26 percent per family from 1 April, the largest annual growth since privatization 36 years ago.
Mathew Lawrence, head of the usual wealth, a thought, said the new schemes were a “come out of prison cards for water companies”.
“They have not built enough water infrastructure and now they cannot afford, so they are told to create much more debt -loaded balances that will also be paid by customers.”
Some of the schemes, including the new Abingdon and Fens tanks, are modeled on the new sewage tunnel Thames Tideway, for which the Londoners have paid an additional addition – currently 26 pounds a year – on their bills since the start of construction. They will continue to pay for the tunnel during its predicted 125-year-old longevity.
Ofwat argues that new PFI schemes are needed to encourage competition and bring expertise because “many of these projects are of the size and complex that water companies have not submitted since privatization, and third -party providers and investors can be better placed to offer them”.
Martin Young, an independent water and energy consultant who attended Friday’s Conference, said that “the size and degree of projects was such as to create a whole new class of assets, and would sit well with infrastructure investors and pension providers seeking to invest in long -term assets.”
There have been no new reservoirs built in 36 years since privatization. New projects include 10 reservoirs, eight water recycling schemes, two desalination plants, and nine transfer schemes that will bring water from the wetter areas to the north to the Dry.
Ofwat said: “Committing with investors and the supply chain is essential for competitive procurement, cash value for clients. This type of engagement activity from the main stakeholders is important to optimize project distribution, and we will work with companies to increase market engagement in the coming months.”
Jefferies refused to comment.
