Northumbrian blames higher energy costs for profits drop
NORTHUMBRIAN Water blamed higher than expected energy costs for a fall in profits of almost £11m and said that bills are likely to rise by around 1.3% above the rate of inflation from 2010.
The utility’s pre-tax profits fell to £77.1m in the six months to end of September, a 12.4% drop of the £88m recorded in the same period last year. Revenue was up by 4.2% to £347.7m in the same period.
The Durham-based group, which also owns Essex & Suffolk Water, said energy costs were more than 50% higher than last year, a figure well above the level the regulator Ofwat assumed at the time of its last price review. Northumbrian also pointed to evidence of a “marginal slowing” in customer payments.
Its operational costs during the period jumped from £174.9m to £190.1m, largely due to the higher cost of electricity.
Managing director John Cuthbert said: “Over the last six months the group has produced good financial and operational results, in spite of a difficult economic climate and the continued volatility in energy markets.
“The group is seeing the benefit of low cost debt secured to fund the capital programme through to 2011.”
Northumbrian said the intended water price rise, part of its five-year plan submitted to Ofwat for 2010-15, would be limited to a 0.7% above-inflation increase in the North East and with the higher 2.8% payable by its East Anglian customers. The group also put forward a £1.3bn capital programme in which it plans to spend 22% more than it did in the previous five-year period.
It has already obtained the electricity it needs for 2009/10 and has bought 27% of power needed for the following year. But it is aiming to reduce the high electricity costs by investing £33bn in a project to create self-generated, renewable energy on Teesside.
The anaerobic sludge digestion facility at its water treatment plant at Bran Sands at Teesport in Middlesbrough uses bacterial technology to produce methane gas from sludge which will create 5MW of power - more than half of that needed to run the plant.
Northumbrian is aiming to produce 20% of its energy from self-generated renewable resources by 2015, five years ahead of the Government’s target.
The plant will be the biggest of its kind in the UK when it becomes fully operational next summer.
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