Thames Water has warned that the summer heatwave and the “beast from the east” cold spell last winter held back its efforts on reducing leaks, as it reported a slump in half-year profits due to regulatory penalties.
Even though it fixed 1,431 leaks a week, its best performance in a decade, Britain’s biggest water company admitted its leakage performance worsened, with 683m litres a day lost in the six months to 30 September, compared with 665m in the same period in 2017.
Thames Water said its first-half profits before tax plunged to £67.7m, from £218.5m a year earlier, reflecting the impact of a £120m package of penalties it received in June. As part of that package, it was ordered to pay £65m back to customers and castigated by the regulator, Ofwat, for its failure to tackle leaks.
Steve Robertson, the chief executive, said the company had been hit, within six months, by “the two most extreme weather events in its history”. Without them, the company would be on target. Looking ahead to next year, he said: “If we had another ‘beast from the east’ and another really hot summer it would be a real struggle.”
The firm blamed the increase in leakage to the freeze thaw following the cold snap, and the prolonged heatwave over the summer, which increased demand for water by 17% and led to more burst pipes.
Attempting to fix leaks more quickly to avoid further penalties, the company said it had installed 26,987 leak-detecting acoustic loggers and installed a further 44,105 smart water meters, which can help pinpoint leaks. It also hired 600 extra full-time engineers and customer service staff, on top of its 6,000-strong workforce.
A new billing system will be rolled out from next week, which will allow the company to offer more tailored social tariffs to those who need them.
At the moment, 53,671 homes (a 10% rise on last year) are on a social tariff, which is 50% cheaper than the average tariff, but from 2020 Thames Water wants to move up to 300,000 families on to social tariffs ranging from 25% to 75% reductions by 2025.
The firm’s plan is to reduce leaks by 15% and cut pollution incidents by 18% by 2025, as demanded by Ofwat.
However, pollution incidents rose to 217 in the six-month period, from 202 a year earlier.
Robertson said the firm hoped to develop a new sewer depth monitor prototype with its partners within 12 to 18 months to help prevent leaks and install 200,000 of these devices within the next six to seven years. It plans to invest £11.7bn between 2020 and 2025 in its infrastructure and customer service.
Last year, Thames Water was fined a record £20.3m after huge leaks of untreated sewage into the Thames and its tributaries and on to land, which killed birds and fish.
Thames Water said it would not pay any dividends to shareholders until 2020-21 before resuming payments of £20m a year between 2020 and 2025.
The company also said its Cayman Islands entities were close to being shut.
The decision to close them formed part of a major shakeup of the business that included the arrival of a new chairman and new pension fund investors, after Australian investment bank Macquarie sold its final stake.
Thames Water has paid no corporation tax for a decade because its payments are deferred while it makes major investments in infrastructure.