Thames Water

Parent Company: Kemble Water Ltd *

Regulated utility: Thames Water Utilities Ltd

Ownership: Investment banks and pension funds

Kemble Water is ultimately owned by Macquarie Bank and other Macquarie-managed funds plus some long term investors principally pension funds

Thames Water is one of the largest water utilities in the UK and certainly the best known. It was acquired by RWE, the German energy company in 2001. Under their ownership, the company continued its international growth strategy, becoming the third biggest water company in the world with 70 million customers in 46 countries. Now the UK company has been sold by RWE to a consortium led by the Australian Macquarie Bank and Thames Water consequently has no international activities.

Macquarie Bank, in a bidding war, paid a high price for Thames of about 1.3 times the asset value – a business value of £8 billion. This has led to a complete change around in strategy as the company refocuses on its core water and wastewater market in London and the south east. Virtually all the other activities have now been divested.

Thames faces huge problems with the leaky water network in the capital, shortage of water supplies and concerns over pollution of the river Thames. This is compounded by the difficulties of replacing infrastructure in a capital city and the drain on resources that the Olympics will cause. The Government has sanctioned in principle the huge (£2.5 billion) Thames Tideway project. The Thames Tideway Tunnel will be the biggest ever contract in the water industry. The first stage (worth £600m) the Lee Tunnel contract was awarded to a consortium comprising Morgan Est, Vinci Construction Grand Projects and Bachy Soletanche. The 4.3 mile tunnel is designed to divert half the sewage currently dumped into the River Thames to Beckton STW. Work on the Thames Tunnel is not due to complete until 2020 assuming planning permission is gained in 2012. The UK's first desalination plant at Beckton opened in May 2010. A huge programme of water mains replacement is underway and future plans include a major new reservoir. Total capital investment is almost £1 billion a year and it will have by far the biggest capital investment programme in AMP5 of any water company.

Under the leadership of CEO David Owens the company has delivered a step-change in operational performance and delivery. It has significantly improved its OPA score and beaten its water leakage target for the third year running. A major business reorganisation is underway with the establishment of an Asset Owner/Service Provider organisation and the implementation of SAP.

Now in light of the tough Ofwat Final Determination which only allowed a bill increase of 1.4% David Owens has resigned to be replaced by Martin Baggs (Ex Southern). Thames had been seeking to raise bills by £3.4% annually for the next five years.

The company achieved its best ever performance in 2009 across many areas of its business delivering nearly £800m of capital investment and improving EBITA by 10.6% as well as achieving its best ever Overall Performance Assessment score of 405 out of 437.

Financial data for regulated utility Thames Water

Data for financial year ended 31 March 2010

	Amount
Turnover	£1624 m
Operating Profit	1052 m
Capital Investment	£782 m

	Amount
Area served	13 331 km2
Population -Water -Waste water	8.5 million 13.5 million
Water -Water supplied a day -Length water mains -Water treatment works	2600 Ml 31 300 km 99
Sewerage -Length of sewers -Waste water treatment works -Sludge produced	67 700 km 349 250 000 te's dry

Address

Thames Water
14 Cavendish Place
London
W1M 0NU

Tel: 020 7636 8686

Web site: www.thameswater.co.uk

Non-regulated business

As part of its current "back to basics" strategy Thames sold its Thames Water Services business to Veolia Water in 2007.

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