WATER PROFITS HIT BY SETBACK
RISING energy costs have led to a double-digit drop in profits at Northumbrian Water Group, which announced its half-year results today.
In the six months to September 30, pre-tax profits were down by 10.9% on the same period last year, even though revenues were up by 4.2%.
The company said “volatile” energy prices, which had risen by 50% to nearly £40m and a “marginal slowing” of customer payments had put cost pressures on the business. But it also said a diversity of revenue streams - including waste treatment, renewable energy and flood protection projects - would see the business through the economic downturn.
Finance director Chris Green said: “Last year we saw a substantial benefit of about £8m from lower electricity prices. Now electricity prices are substantially higher.
“We’re not anticipating a further increase. In addition, we have secured low cost debt through to 2011.”
Mr Green said a strong cashflow and energy efficiency projects such as the advanced anaerobic sludge digestion facility at Bran Sands would underpin the business going forward.
The £33m plant will deal with the sludge arising from effluent treatment and the methane gas produced will generate around five megawatts of electricity for the site - enough renewable energy to power over half the treatment works on the 52-acre site. The company said the project would significantly reduce operating costs and “put us well on the way” to achieve our target of having 20% of our energy produced from self-generated renewable sources by 2015.
The company has also invested £150m in sewer flooding projects in the North-east and has submitted to regulator Ofwat a draft five-year business plan which forecasts that bills will rise by an average of around 0.7% in the northern region.
The company said the interim results were “in line” with expectations. Operating costs increased by £16.5m or 8.6% to £209.1m, which largely reflected the impact of inflation, depreciation and higher energy prices. Earlier this year the group announced strong annual results, with “better than expected” pre-tax profits of £170.3m in the year to March 31 - up 15.2% on the previous year.
The group provides water and sewerage services to around 2.6m people in the North and water services to 1.7m in Essex and Suffolk.
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