Capital Markets Event United Utilities Group PLC
Steve Mogford Chief Executive Introduction United Utilities Group PLC Capital Markets Event 15 March 2018 Crummock Water
The paradigm shift Focus on Invested in our Significant customer people transformation “If you always do service programme Graduate and apprentice what you always programmes and external did, you will Systems Thinking recruitment always get what you always got.” Capital Markets Event Introduction
United Utilities is leading the way The industry faces many challenges Maintaining United Utilities is now a Environmental Affordability Reputational shareholder returns leader among the WASCs United Utilities is ideally placed to meet these challenges and our innovation capabilities are at the heart of this. Today will demonstrate how innovation and our Systems Thinking We have a clear vision and approach is central to our strategy and will deliver long term value for a long term strategy customers, the environment and shareholders. Capital Markets Event Introduction
What we mean Ofwat’s SIM measure Customer UK CSI by leading satisfaction CCWater customer satisfaction research Recognition cross sector Porter’s Efficient Frontier Water Environmental quality A* Low New Efficient Innovation Frontier Set DWI recognition A 4* industry leading Industry leading status with the approach to Environment Agency resilience Cost B Holistic Systems Thinking Less Than Innovation Centre Capital More efficient delivery Best Practice High Embedded culture delivery Using competition Quality High Source: Adapted from Michael Porter, “What is Strategy?” Harvard Business Review, November -December 1996 Capital Markets Event Introduction
Agenda Systems Thinking Engineering and Customer Service Overview & Innovation Capital Delivery 13:25 – 13:50 11:10 – 11:30 11:30 – 12:00 13:00 – 13:25 Steve Fraser Simon Chadwick Richard Ratcliff Louise Beardmore Chief Operating Officer Central Operations Director Engineering Delivery Director Customer Services & People Director Steve joined United Utilities in 2005 Simon joined United Utilities in 1997 Richard has worked as a process Working as Customer Services & from the power and utilities service and since then has held a variety of engineer throughout the world for 24 People Director at United Utilities, provider Bethell Group, where he roles in the wholesale and retail years. He joined United Utilities in Louise has held a number of senior was Operations Director. Steve, a areas of the business. Simon now 2015 as Head of Engineering and positions at North West Water, member of the United Utilities Group heads up Central Operations at Technical disciplines. In 2017 Richard Norweb Plc, Vertex and United Board, is currently the Chief United Utilities, focusing on took on the role of Engineering Utilities, leading business in Operating Officer responsible for the transforming the business through Delivery Director at United Utilities, operations, customer services and HR regulated water and wastewater technology led innovations. managing the engineering and in the UK and internationally. Louise business, having previously worked delivery aspects across the regulated is a huge advocate of the power of as Managing Director of the water and wastewater business. employee engagement to drive wholesale business and, prior to that, improved customer service and is a as Managing Director of the energy & Non-Executive Director of Engage for contracting services division of Success as well as a Vice President of United Utilities. the Institute of Customer Service. Capital Markets Event Introduction
Steve Fraser Chief Operating Officer Overview Manchester Square Pumping Station
Strength in financial risk management 61% Maintaining a Appropriate gearing One of the Stable IFRS stable A3 credit aligned with Ofwat’s lowest financing costs pension surplus rating notional structure in the sector Capital Markets Event Overview
No longer in catch AMP7 • Evolution of regulatory regime up; now a leader • Reset of ODI and totex mechanisms with increased opportunity for reward • Extending the lead on Systems AMP6 Thinking • Aiming for more balanced • No longer in ‘catch up’ mode regulatory outperformance • Upper quartile against most operational and customer service metrics • Five year lead on Systems AMP5 Thinking • Regulatory outperformance • Refocus on operational biased towards financing performance AMP4 • Catching up with leading • Operational laggard performers • Sale of non-regulated business Capital Markets Event Overview
PR14; a challenging settlement ODI’s Rewards/Penalty ranges 6,500 200 +140m +50m 100 UU proposed totex +30m +30m 6,000 £m 0 c£600m sustainable cost reductions delivered Totex (£m) through more efficient capital delivery and 5,500 Systems Thinking -100 -£50m -£100m -£70m -200 5,000 -300 Ofwat proposed totex 4,500 -400 -500 4,000 -£470m Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 P10/P90 range Soft guidance Target Target PR14 May 2015 May 2016 May 2017 ODI package heavily skewed to the downside £600m efficiencies vs. original business plan Capital Markets Event Overview
Delivering our strategy for AMP6 Net regulatory capex 2015/16 2016/17 2017/18 2018/19 2019/20 Net cumulative ODI reward in years 1 and 2 Planned acceleration of capital programme Capital Markets Event Overview
Sustained improvement 5 year improvement 5 year improvement Water performance measure 1 Wastewater performance measure to 2016/17 to 2016/17 WTW Coliform infringements +67% Cat 1-2 pollution +75% WTW Turbidity infringements +67% Cat 3 pollution +53% SR Coliform infringements +47% Failing Flow to Full Treatment +18% DWI Category 3 or above events +29% Bathing water failures +100% Total number of water quality infringements +34% Maintenance - proactive / reactive +29% Customer Contacts Discoloured Water +22% SIM Quantitative +22% Customer Contacts Taste and Odour +10% SIM Qualitative +10% Leakage (Ml/d) +3% Written Complaints +34% SIM Qualitative +6% Stage 2 complaints +55% SIM Quantitative +56% Internal flooding - other causes +25% Written complaints +24% Stage 2 complaints +73% Sewer blockages +43% 1 DWI Measures are calendar year Capital Markets Event Overview
Heading into AMP7 as a high performing company This gives us We’re delivering on Our Systems Thinking This is delivering our We’ve come our AMP6 strategy; approach is a current leading from being a confidence performance and we delivering more competitive laggard to heading into also have further catching up to for less and advantage and is 5 AMP7 and applications that will now leading sustainable year on years ahead of the beyond. help extend the industry. year improvements. rest of the industry. our lead. Capital Markets Event Overview
Simon Chadwick Central Operations Director Systems Thinking & Innovation
Innovation in United Utilities Implementing Systems Thinking Systems Innovation Thinking Using digital technology to accelerate delivery of Systems Thinking Sharing our Overview and our Case studies approach learning to date Case studies Capital Markets Event Systems Thinking & Innovation
Systems Thinking Innovation in our operation strategy
An introduction to Systems Thinking Traditional analysis focuses on the individual pieces of what is Components of a system being studied Systems Thinking focuses on how the things being studied interact with the other constituents of the system. Instead of isolating smaller and smaller Elements Interconnections Functions parts of the systems being studied, Systems Thinking works by expanding its view to consider larger and larger numbers of interactions as an issue is being studied. Capital Markets Event Systems Thinking & Innovation
Integrated catchments A Systems Thinking approach to catchment management
Systems Thinking in an environmental catchment Systems Thinking at catchment scale The Petteril integrated Holistic risk assessment catchment case study Enhanced modelling Intensive monitoring Benchmarking Stakeholder engagement Multiple benefits Innovation Partnership Targeted asset + Innovative permitting approach Co-delivery of catchment interventions catchment New low tech asset for Phosphorous removal Match funding opportunities interventions Natural capital pilot Petteril steering group Match funding Nutrient trading Community engagement opportunities More for less Flooding and water quality improvements Added natural capital value Long-term benefits to the catchment Capital Markets Event Systems Thinking & Innovation
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