Dyr Cymru Welsh Water

Parent company:         Glas Cymru

Regulated utility:         Dwr Cymru Welsh Water Ltd

Ownership:                   Not for profit organisation

Welsh Water's parent company Glas Cymru is an unusual water company in that it is the only not for profit organisation in the water industry. This means it has no shareholders and profits are either reinvested in the business or returned to customers.

In an imaginative move Glas Cymru was formed in 2000 to buy Welsh Water from the struggling Western Power Distribution business. Alongside this a debt financing package was established and the business refocused entirely on water and waste water treatment. The Glas Cymru business model aims to reduce asset financing costs, the water industries single biggest cost, and improve service delivery by employing best in class contract partners.

Until very recently the majority of operations have been contracted out. Currently Welsh Water is undertaking the biggest re-structuring since it was bought by Glas Cymru. The operating contracts with United Utilities and Kelda have been terminated and all staff are being transferred back in-house. As a consequence its number of employees has jumped from only 170 to about 2100. Job losses of about 300 will follow as Welsh Water strives to cut its operating costs by 20% to meet the demanding Ofwat Final Determination and enable average household bills to fall by £30 before inflation.

Responsibility for delivering the capital programme has been delegated to a number of partner organisations. The main civil's partners are Costain in the north of Wales, Morrison Construction in the South West and Morgan Est in the South East of Wales. Process partners are Imtech, Black and Veatch and newly appointed Grontmij working with Morgan Sindell in South Wales.

Welsh Water is unique among the water companies in having copious supplies of raw water due to its geography and high rainfall in Wales. Hence water leakage is of low concern but waste water treatment and in particular coastal discharges are an important issue. Here it has taken an industry lead with its Green Seas initiative where the company strives to work in partnership with other interested groups to achieve environmental improvement.

Glas Cymru has performed well despite the impact of the economic recession. It has reduced its gearing to 71% and increased its 'customer dividend' to £22 per customer. Turnover has increased - like many water companies due to rising prices. It also secured a strong liquidity position with capital investment pre-funded and the agreement of additional loan facilities.

Welsh Water's Overall Performance Assessment score increased to 406 points from 394 in 2008. This puts Welsh Water in the middle of the water and sewerage companies. Welsh Water faces some tough challenges as it seeks to reduce its operating costs by 20% while delivering £1.2 bn of capital investment over the next five years.