United Utilities Group PLC PR19 business plan assessment 1
Steve Mogford Chief Executive United Utilities Group PLC Capital Markets Event 15 March 2018 Crummock Water
Initial assessment One of only three companies meeting high hurdle to achieve fast track assessment A = High quality, ambitious and innovative plan with evidence that overall is sufficient and convincing. B = High quality plan, not sufficiently ambitious and innovative to be exceptional with evidence that overall is sufficient and convincing. C = Concerns with the plan: Plan falls short of high quality and/or evidence is insufficient and/or unconvincing in some areas. D = Substantial concerns with the plan: Plan falls significantly short of required quality and/or little or no evidence, or no convincing evidence. United Utilities • PR19 Business Plan Assessment 3
Company monitoring framework Only company to retain self-assurance status Financial Risk & Water Long term PR19 IAP Charges Assurance Financial Cost PR19 IAP Mvt from monitoring Outcomes compliance resources Case work viability data Category engagement plan flows assessment data quality 2017 framework statement mgt plan statement consistency ↔ United Utilities Self – assurance ↑ Welsh ↔ Anglian ↑ Bristol ↓ Northumbrian ↔ Portsmouth ↔ Severn Trent ↓ South East Targeted ↔ South Staffs ↔ South West ↔ SES Water ↑ Thames ↔ Wessex ↔ Yorkshire ↓ Affinity ↔ Harfren Dyfrdwy Prescribed ↔ Southern Water United Utilities • PR19 Business Plan Assessment 4
Highlights Industry leading in many areas Engaging Confidence & Resilience customers assurance Affordability Affordability Innovation & & vulnerability vulnerability United Utilities • PR19 Business Plan Assessment 5
Affordability and vulnerability Ambitious, innovative and sector-leading [United Utilities ’] plan includes ambitious, innovative and sector- @unitedutilities has high leading proposals to make customers’ quality, ambitious and bills affordable and on providing innovative plans to help support for vulnerable customers. customers struggling to pay “@Ofwat” [United Utilities] proposes sector- leading flexible payment plans for customers who are struggling to pay. [United Utilities] is leading the sector by working with its local energy network to address customer vulnerability. United Utilities • PR19 Business Plan Assessment 6
Delivering outcomes for customers Strong track record in operational excellence Transformation since 2011 Customer views Performance commitments that reflect Strong track record of sustainable customer views excellence Upper quartile targets Company-specific ODIs Accepted interventions to reflect view To provide further detail on company- of upper quartile performance specific ODIs P50 projection Time to plan Revised cumulative P50 projection for Will reprioritise plans to account for ODIs currently estimated at minus changes in ODI targets 0.6% of RoRE United Utilities • PR19 Business Plan Assessment 7
Sector-leading approach to resilience Setting the benchmark for operational, corporate and financial resilience Systems Thinking fundamental to United Utilities has a sector leading approach approach to resilience. The plan shows convincing evidence across operational, corporate and financial Sector-leading financial resilience resilience. It shows a clear link between prioritised risks and measures to reduce risks to resilience. Manchester and Pennines project Funding to develop north-south water transfer scheme United Utilities • PR19 Business Plan Assessment 8
Efficient costs Significant improvement in efficiency Total costs compared with Ofwat's view 30% % above / (below) Ofwat view 25% 20% Industry average = +15% 15% 10% +3% 5% 0% -5% Thames Anglian South East Welsh Southern South Staffs SES Water Yorkshire Bristol Northumbrian Affinity Severn Trent South West United Utilities Portsmouth Hafren Dyfrdwy Wessex Source: Ofwat, PR19 initial assessment of business plans: Summary of test area assessment United Utilities • PR19 Business Plan Assessment 9
Sector-leading approach to innovation The most embedded innovation culture Innovation is clearly integrated Its plan includes strong United Utilities shows the most throughout the culture of the evidence of ambitious and embedded innovation culture, company and it includes a sector leading ideas across all with an ambitious and sector- number of innovative drivers on innovation. leading approach to innovation suggestions which are not seen capability. in the sector… Commitment to Systems Thinking Innovation Lab Bold and wide ranging strategy Will deliver future success United Utilities • PR19 Business Plan Assessment 10
Aligning risk and return Approach to financeability has been broadly accepted Adopted Ofwat’s WACC to be finalised at methodology guidance Final Determination on WACC at 2.4% 1 Responsible approach Upfront mechanism for to financial resilience, sharing outperformance gearing and access to through CommUnity capital markets Share 1 Appointee, RPI stripped United Utilities • PR19 Business Plan Assessment 11
Summary Committed to making a success of AMP7 Benefits of fast track Fast track plan Reflects transformation to date Reputational, procedural and financial benefits and the opportunity to refine and ambition for the future plans and make a flying start Strong track record Working constructively Strong track record – Continue to work committed to making a success constructively with Ofwat of AMP7 through to draft determination in early April United Utilities • PR19 Business Plan Assessment 12
Any questions?
Cautionary statement This presentation contains certain forward-looking statements with respect to the operations, performance and financial condition of the group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this presentation and the company undertakes no obligation to update these forward-looking statements. Nothing in this presentation should be construed as a profit forecast. Certain regulatory performance data contained in this presentation is subject to regulatory audit. This announcement contains inside information, disclosed in accordance with the Market Abuse Regulation which came into effect on 3 July 2016 and for UK Regulatory purposes the person responsible for making the announcement is Simon Gardiner, Company Secretary. United Utilities • PR19 Business Plan Assessment 14
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