Capital markets day 2 March 2020 United Utilities Group PLC - PowerPoint PPT Presentation

Capital markets day 2 March 2020 United Utilities Group PLC

Capital Markets Day Steve Mogford Chief Executive

A purpose led company Our strategic themes, in place since 2011, drive how we work towards delivering our purpose At the The best In a lowest service to responsible sustainable customers manner cost Continuity and stability of approach has provided the platform for transformation in performance for the benefit of all stakeholders United Utilities • Capital Markets Day 3

A strong track record of leading on ESG Significant achievements against environment, social and governance 2009 2000 Business in Business in the the Community Community ‘Company of the year’ ‘ Company of the year ’ AMP3 AMP4 AMP5 AMP6 2014 2019 2001 Early adopter Achieved 2005 2006 Established of integrated self-sufficiency director level Led sector’s Set our first 2019 reporting 2016 of pensions approach to carbon reduction committee 23% female Priority scheme 2011 catchment target focused on Services apprentices management Three strategic responsible (sector average launched through SCaMP business themes introduced 5-7%) Planted over 2 million trees Over £600m outperformance reinvested £43m community investment United Utilities • Capital Markets Day 4

Our approach from AMP6 to AMP7 Our strategy has played out and delivered Accelerated Delivering Sharing investment outperformance outperformance Sustained AMP6 Fast track Created the dividend business plan right culture Accepted the FD and maintained UUG dividend into AMP7 United Utilities • Capital Markets Day 5

Summary of UUW’s final determination A balanced settlement overall Increasing resilience through 13.8% Haweswater Aqueduct +1.5% Resilience Programme (HARP) real reduction in average bills Delivering for 110km long the environment Targeting -1.8% UUG dividend 20% reduction £5.8bn maintained in pollution with CPIH totex allowance Opportunities 15% reduction represented by ODIs growth in leakage A purpose led company, recognising the needs of all of our stakeholders United Utilities • Capital Markets Day 6

Agenda Morning (10.30 – 12.00) Afternoon 1 (12.30 – 14.30) Afternoon 2 (15.00-16.30) Jo Harrison Louise Beardmore Steve Mogford Environment and Asset Customer Services and Chief Executive Strategy Director People Director Totex Performance commitments Customer and people James Bullock Strategy and Regulation Director Steve Mogford Simon Chadwick Haweswater Aqueduct Chief Executive Digital Services and Central Resilience Programme Operations Director Closing remarks Innovation and Systems Thinking Russ Houlden Chief Financial Officer Finance Lunch (12.00 – 12.30) Coffee break (14.30 – 15.00) Close (16.30) United Utilities • Capital Markets Day 7

Totex allowance increased from draft determination £5.8bn AMP7 totex allowance AMP7 net totex allowances (£m) 50:50 customer sharing ratio £5,798m £5,564m £475m £508m Weighted average PAYG of 59.6% £5,323m £5,056m - aligned to the natural rate £57m HARP allowance and £44m for Draft Determination Final Determination strategic water resource development Wholesale Retail Exiting AMP6 at the Final determination allowance is required totex run rate £234m higher than draft determination United Utilities • Capital Markets Day 8

Totex run rate on target AMP6 investment delivering efficiencies to be sustained into AMP7 Totex 1 1,600 1,400 1,200 Capex 1,000 Capex Capex £m 800 600 Opex Opex Opex 400 & & & IRE IRE IRE 200 0 2015/16 2019/20 AMP7 FD average Source: Company PR19 business plan submission, September 2018 and Final Determination 1 2017/18 prices, including £250m AMP6 additional investment but not the further £100m announced in May 2019. United Utilities • Capital Markets Day 9

Already delivering efficiencies AMP6 focus on innovation, market testing and cost challenge delivering efficiencies required for AMP7 Innovation Market testing Cost challenge Identified as having the most Risk and value assessment Market Engagement embedded culture of innovation across all major projects Methodology to procure as expected to deliver £100m efficiently as possible savings in our plan Systems Thinking delivering efficiencies and Appointed two capital £110m reduction in scope better service for customers delivery partners as preferred of wastewater environment bidders for over £300m of programme through working Innovation Lab 2 is a source AMP7 capital programme proactively with the of global ideas to keep us at achieving £40m of savings the frontier of new ideas Environment Agency versus the traditional delivery route United Utilities • Capital Markets Day 10

Summary AMP6 strategy has delivered and gives confidence for AMP7 Already implementing AMP6 strategy has delivered plans for AMP7 Fast Relentless Most track focus on embedded status customers Confident of culture of achieved innovation delivering efficiencies required to meet Stretching cost challenge service targets but Delivering Strong well prepared and outperformance balance a strong track sheet record Acting responsibly and in the interests of all of our stakeholders United Utilities • Capital Markets Day 11

Capital Markets Day James Bullock Strategy and Regulation Director

The Haweswater Aqueduct Up to Our largest potable 2.6m water delivery system diameter 110km long Delivery of up to 570 million litres per day to 2.5 million people As well as supplying Through 18 Manchester separate off takes United Utilities • Capital Markets Day 13

The Haweswater Aqueduct 16 tonnes of water , carried by gravity every minute It takes 36 hours for water to It fills 1 Olympic swimming travel from pool every 6 minutes top to the bottom United Utilities • Capital Markets Day 14 14

Haweswater Aqueduct Video

Securing long-term regional resilience The Haweswater Aqueduct (HA) Outage findings Timeline 1919 - 1955 • Construction of the HA took place The outage identified Construction of HA between 1919 – 1955, during a period two principle risks of material and skill shortages as a 1958 - 1974 result of WW2 Additional resilience: siphons, link to Windermere The risk to • West East Link Main completed in 2012 / Ullswater and Watchgate water quality – allowed isolation of HA for inspection 1996 and repair Pipe bridge repairs • Outages limited to a period of 4 weeks 2005 - 2010 The risk of an during lower periods of demand and Aqueduct Maintenance interruption to require 42 treatment works to run at Programme the supply of full capacity 2010 - 2012 safe and clean • Internal inspections in 2013 and 2016 Enabling works (WTWs) and drinking water West-East Link Main (WELM) United Utilities • Capital Markets Day 16

Securing long-term regional resilience We prioritised We assessed the options to secure resilience the highest risk • Over 300 options considered Hallbank section of • We engaged with over 2,300 household and non-household the aqueduct customers to understand their views identified as most immediate risk • Tested potential options further with 59 companies through market engagement • Replacement tunnels now identified as most suitable option Work started in 2019 and on track to complete in 2020 United Utilities • Capital Markets Day 17

Haweswater Aqueduct Resilience Programme Direct Procurement for Customers Pathfinder • First major project to be subject to Direct Procurement for Customers approach • Pathfinder project for Ofwat • Secures resilience for UU customers • c£57m initial allowance to enable procurement and planning activity • Construction and financing subject to competitive tender process • Estimated contract value of £750m per submitted business plan United Utilities • Capital Markets Day 18

Direct Procurement for Customers Progressing the scheme PR19 Business Pre-CAP Construction Contract in Tender Activity Contract Activity Period Plan Operation c.25 year financed solution Contract negotiation and Detailed design and The Manchester & Need confirmed by Ofwat in operation leading to construction of new award stage. Pennines Resilience in Final Determination and refinancing or transfer of solution to de-risk the 6 scheme was proposed as a initial investment agreed. CAPs will bid for detailed the asset to UU. single line sections of the design, construction and DPC scheme with two UU are undertaking initial HA by 2029 financing associated performance design, surveys & planning commitments as well as developing the commercial construct 2018 2021 2022 2029 2054 United Utilities • Capital Markets Day 19

Capital Markets Day Russ Houlden Chief Financial Officer

Best in class pensions position Relative valuations should reflect pensions positions 2019 2 Full normalised IFRS 132p/share 1 4 102p/share Full IFRS 8 Based on analysis presented in our 2019/20 0 No adjustment 0p/share half year results United Utilities • Capital Markets Day 21