Householders in a Staffordshire village wrongly charged for surface water drainage for many years are to receive more than £400,000 from Severn Trent Water, following the intervention of the Consumer Council for Water. In a landmark case, 700 homes and local businesses in Marchington near Uttoxeter in the East Midlands will share the rebate after Severn Trent agreed to refund the incorrectly billed customers back to the year 2001.This is the first time such a settlement has been reached covering an entire village and was achieved with the support of the local Parish Council and the Consumer Council for Water. The village’s drinking water supplier and billing company is South Staffordshire Water which collects waste water charges on behalf of Severn Trent, owners of the waste sewers, but not the surface water drains.

One of the country’s biggest water companies is to be charged by the Serious Fraud Office, it has been revealed. Severn Trent Water is being accused of lying about its leakage figures to the industry watchdog Ofwat - it faces substantial fines if convicted. Information given to Ofwat is crucial in determining how much water firms can charge households for water, waste services and the cost of repairing the network of pipes. The news comes a few days after it emerged that Southern Water faces fines of up to £20.3m for misleading Ofwat by deliberately misreporting customer service information. Severn Trent says it has been told that no individual member of its staff will be accused of any offence. The charges relate to information supplied by Severn Trent going back as far as 2000. In 2005 the SFO told the company it was undertaking a criminal investigation into “alleged reporting irregularities”. Ofwat had been carrying out is own investigation following allegations of false reporting against one of its employees in May 2004. It published its findings almost two years later - and Severn Trent had to apologise to customers and reduce its prices. The company has acknowledged that the regulator “may expect further amends to be made to customers”. It serves some eight million people across a large part of the country, from mid-wales to Rutland and Bristol to the Humber. Chief Executive Tony Wray said: “We will now study carefully the details of the charges, which relate to the responsibilities of a previous regime.” The group is also facing Ofwat penalties over “misstated” customer relations data and added today that it was “unable to give a reliable estimate” over the potential fines it faces. In April 2006, Severn Trent also said it had uncovered evidence of the “misstatements” going back over several years.

South Staffordshire Water was on Monday sold for £400m by Arcapita, the Bahrain-based investment group, to Alinda, a US infrastructure fund. Arcapita, which also owns Northern Irish electricity supplier Viridian, bought South Staffordshire Water in November 2004 for £245m ($504m). The group did not disclose the terms of its deal with Alinda on Monday, but people close to Arcapita said the water assets had been sold for about £400m. The deal is the latest in a series of sales in the UK water sector. This month Royal Bank of Scotland sold Southern Water to a consortium led by Australia’s Challenger Infrastructure Fund and JPMorgan Asset Management for £4.2bn, a 30 per cent premium to its regulated asset value. Analysts said that both the South Staffordshire and the Southern Water deals showed that infrastructure fund and pension fund investors’ appetite for water assets had not been diminished by the credit squeeze. One analyst said there would be more water deals in the near term, with Kelda, Yorkshire Water’s owner, and Northumbrian Water the most likely targets. South Staffordshire Water supplies water to 1.25m people in the Midlands. As well as this regulated water business, South Staffordshire Water owns several non-regulated subsidiaries including Hydrosave, which specialises in leak detection, and Aqua Direct, a bottled water and watercooler business. The group employs about 1,400 people and in the past financial year generated £120m of revenues and £27m of operating profit.

Australia’s richest man, James Packer, has beaten Goldman Sachs to a stake in one of Britain’s last available water assets, Southern Water Capital, which was sold yesterday for £4.15 billion ($9.45 billion). Mr Packer revealed yesterday that Challenger Infrastructure Fund (CIF) - the infrastructure arm of his listed financial services vehicle was part of a winning consortium for the water and sewerage group, which was put up for sale by Royal Bank of Scotland earlier this year. Southern Water supplies parts of Kent, Sussex, Hampshire and the Isle of Wight. CIF will become the second largest shareholder in Southern Water, holding a 27 per cent stake, worth $690 million, on an EBITDA multiple of 9.2 times, behind JP Morgan Asset Management Infrastructure Investments Group, which has 32 per cent. The runner-up was Goldman Sachs, which lost out on price. Mr Packer joins a long list of Australian investors buying British water assets. These include Westpac, which owns two water assets in Britain, Kent Water and South East Water; Macquarie Bank’s purchase of Thames Water for £8 billion; and IFM, which joined Colonial First State and a Canadian pension fund to buy Anglia Water for $5.5 billion last year. CIF chief executive Steve Bickerton told The Australian the asset would provide a cornerstone investment for the fund. CIF also has stakes in British gas and electricity utility Inexus, some stakes in British gas distributors and a holding in British broadcasting services provider Arqiva. In April, Challenger added the owner of bulk liquid European storage company LBC Group to its balance sheet, bringing its total property and infrastructure assets under management to about $3.5 billion. Mr Bickerton said Southern Water would make up 37 per cent of CIF’s portfolio. He said CIF would consider recycling existing assets that no longer had as much relevance to its model. It is believed to be considering selling its 7 per cent stake in Northern Gas and its 7 per cent stake in Wales & West, both of which are minority interests. Mr Bickerton said there was great interest in water assets in Britain because they were fully privatised, fully transparent and have a stable regulatory environment. “They are easily understood and so it will provide a good cornerstone investment to the business,” he said. Mr Bickerton said the group still had “headroom” to make other acquisitions, given it didn’t have to raise capital as part of the purchase of Southern Water process. CIF will fund the deal through $494 million in debt and the issue of £97.9 million in redeemable preference securities to its parent, Challenger Financial Services Group Ltd, part of James Packer’s Consolidated Press Holdings. Packer has 21 per cent of Challenger, which has specialist funds under management, including infrastructure and property, holding assets worth more than $3.5 billion. Challenger wants to increase that number to more than $10 billion by 2010. Southern Water is the fastest-growing of the 10 water and sewerage companies in Britain, with about 100 water treatment works and 370 sewerage treatment works supplying water to more than 2.3 million people and providing waste-water services to about 4.3 million people. CIF remains on track to deliver a distribution of 34c per unit for the year to June 30, 2008, and reaffirmed its medium-term forecast distribution growth guidance of 5 per cent a year.

Water service watchdog Ofwat is planning to fine Thames Water £12.5m for reporting and customer service failings.

British companies are losing up to £1,000 a minute due to inefficient water use, a government quango has claimed. Envirowise says that the cost of waste water is comparable to pouring 40 bottles of champagne down the drain every 60 seconds. It claims that £507 million could be saved annually if UK firms took its advice and put in place efficiency measures to better use water. “Our research shows that many companies don’t view water as a resource, underestimating its value and the volumes they are using and disposing of on an annual basis,” said Envirowise director Dr Martin Gibson. Released to coincide with the beginning of Water at Work Week, Envirowise’s research claims that 1.3 billion cubic metres of water are being used in British businesses every year, and that this figure could be reduced by almost a third by taking simple water efficiency steps. “Water at Work Week is about raising awareness of this issue and helping UK businesses make substantial cost savings,” Dr Gibson continued. Envirowise claims to have already saved British firms more than £1 billion over the last 13 years.

Royal Bank of Scotland-owned Southern Water is expected to be the subject of a 4 billion takeover battle this week, the Mail on Sunday reported. Bidding ahead of Friday’s first-round deadline has been more competitive than expected, bankers told the paper. It said investment banks and infrastructure funds were among those interested.

The economic regulator of the Scottish water industry today announced that it has granted the first permanent water and sewerage services licences to a new entrant to the industry, Satec Ltd. From April 2008, business customers will be able to buy water from suppliers other than Scottish Water. Scottish Water will act as the wholesaler, selling on to retail licensees. Satec is the first private sector company to be granted licences to sell water to the 130,000 business customers in Scotland. The opening up of the market provides an attractive opportunity to new entrants to offer customers improved value for money, either in new and improved levels of service or lower prices. Speaking today Sir Ian Byatt, Chairman of the Commission said: “This is a first for Scotland.  All non-household customers now have a choice of water retailer.” The Commission welcomes applications from other potential licensees. Successful applicants will be able to compete for customers and negotiate pre-agreements in the run up to 1 April 2008, when agreements will take effect. 

1)     Copies of the licences granted to Satec can be found on the Commission’s website, www.watercommission.co.uk. 

2)     Satec Ltd was founded in 1969 but its pedigree in water and wastewater treatment dates back over a hundred years with Hughes & Lancaster Ltd (one of the companies acquired by Satec Ltd in 1969) which supplied its first wastewater pumping system in 1882. Today, Satec Ltd specialises in packaged and engineered treatment of ‘clean’ process water and ‘dirty’ wastewater, sewage and sludge water. 

3)     For information about how to apply for permanent water services and/or sewerage services licences, including details of the application process, go to www.watercommission.co.uk or telephone 01786 430200. 

4)     After 1 April 2008, Scottish Water will remain the wholesale supplier of water and sewerage services in Scotland. Licensed service providers will buy wholesale services from Scottish Water and retail these services to business customers. Competition of this kind (similar to that introduced to the electricity and gas industries) should bring wider choice, lower prices, better services and increased innovation.

5)     End customer charges will continue to be protected. Licensed service providers in the market will be required to offer default tariffs set by WICS to all customers. These default tariffs will rise by no more than 1.5% above inflation annually until 2010 (the tariffs business customers would have paid had Scottish Water remained their end service provider).   

6)     The framework for competition in the Scottish water industry is set out in the Water Services etc (Scotland) Act 2005. The 2005 Act requires the Water Industry Commission to establish a regime to license new entrants into the market, and facilitate the orderly opening of the market

Business Water Consultants:

Water companies are to be given new powers to force meters on millions of families amid claims it is necessary to cope with future droughts. The controversial plan, which will add more than £1 billion to water bills over the next decade, was given the green light by the government on Thursday. Ministers claim that despite the floods of this summer, the country is likely to see more droughts in future years, which will create a need to conserve water. They argue that imposing meters generally leads to a reduction in household use of some 10 per cent. New powers to adopt compulsory water metering are to be given to those companies who can show they are in so-called “water stress” areas. However, the government plans to direct every water company in the country to consider imposing meters on customers to solve water shortage problems. The most immediate impact is likely to be felt across southern Britain, where as many as eight million homes, housing 18.9 million people, could be required to have meters within 10 years. Compulsory metering is highly controversial for the cost of installation, which is likely to be more than £1.3 billion, will be passed on to householders in the form of higher bills. While there are fears that metering is a particular burden for poorer families who have a large number of children and some disabled groups, who are heavy water users. To date the introduction of water meters has been sold to consumers on the promise that they can save money compared to the traditional payment system linked to a property’s rateable value. However, this is only a temporary benefit, for the net effect of metering in the long term will be higher bills for all, because customers will have to meet the costs of fitting the devices. While most homes in the country already face inflation-busting increases in water bills for at least the next decade as firms raise money to replace ageing pipes and sewers. Before Labour came to power in 1997, the party vociferously campaigned against compulsory water metering suggesting it would be a particular burden to poor families. Environment minister, Phil Woolas, announced the U-turn, saying: “Metering saves water - around 10 per cent per household - and it seems right to me that in seriously water-stressed areas the costs and benefits of compulsory metering are given consideration alongside other options.” Industry critics argue that companies should be forced to do much more to stop the appalling waste of water through leaky pipes, before expecting customers to use less. Recent figures show water companies are wasting 3.42 billion litres every day through leaking pipes, or the equivalent of two full baths for every household in the country. Mr Woolas tried to head off criticism by saying the decision “in no way absolves companies from their responsibility to deliver on leakage targets”. The minister said water companies will have to make a “strong case” if they want to impose metering. This would involve demonstrating it is a cheaper option for ensuring there is enough water for customers than, for example, building new reservoirs. Currently, some 30 per cent of homes have a water meter and the figure is increasing by around 2per cent a year. The government gave the small Folkestone & Dover water company permission to install water meters on a compulsory basis in March last year. Some 11 other companies are in so-called water stress areas and will find it easier to force meters on customers. These include Thames Water, Southern Water, Mid Kent Water, South East Water, Sutton & East Surrey, Essex & Suffolk. The government claims the proposals have the support of the industry and its green advisers at the Environment Agency. Both the National Consumer Council and the Consumer Council for Water have highlighted concerns that vulnerable groups could suffer big increases in their bills under metering. A consultation document published by the environment department, DEFRA, admits some groups “did not agree with the consultation proposal”. It said: “Either they argued that metered charging hits large families and people with illnesses that use a lot of water hardest or that companies could do more to provide resources and reduce leakage, and that companies should do this first, before metering customers.” However, these concerns have been dismissed. The Government said: “There will be winners and losers in any change to charging. However, we believe that metering is the fairest way of charging for water. It is the norm elsewhere in Europe and for other utilities. “We believe that the potential benefits in terms of water saving in areas of serious water stress make this an appropriate measure to the scale of the problem.”

Australian infrastructure investment group Macquarie is plotting an audacious £3.5bn-£4bn consortium bid for Southern Water, the utility that provides water to at least one million households in Kent, Sussex, Hampshire and the Isle of Wight. Last year, Macquarie led a consortium of investors to buy Thames Water from RWE for around £8bn. Macquarie has contacted several advisers about a potential offer for Southern Water and is believed to have received an information memorandum on the business, according to people familiar with the matter. The move may cause a stir as regulators have opposed the ownership of more than one large water utility by any owner, or group of owners. Last year, Macquarie led a consortium of investors to buy Thames Water for around £8bn from German power company RWE. Since then, Macquarie Bank has transferred its ownership of Kemble, the vehicle that owns Thames Water, from its balance to its own infrastructure funds, which now own around 45pc of the holding company. According to a position paper by water regulator Ofwat, the rest of the equity in Kemble has been split out among 14 different infrastructure investors, ranging from Santander Private Equity to the Queensland Investment Corporation. Other investors in Thames brought in by Macquarie include Stichting Pensioenfunds ABP, one of the biggest pension funds in Europe, and Portuguese infrastructure investor Finpro. It is not clear whether Macquarie plans to finance a bid for Southern Water by providing equity from its own balance sheet or from its own infrastructure funds. People familiar with Macquarie’s plans said the group was primarily looking to put together and advise a consortium of infrastructure funds interested in buying Southern. This may allow Macquarie to get over competition and anti-trust hurdles. An Ofwat spokesperson said: “We would need to see the structure of a bid before we comment”. Royal Bank of Scotland appointed Deutsche Bank earlier this year to carry out an auction of Southern Water, which could fetch up to £4bn. First round bids are due in at the end of August. If Macquarie does proceed with an offer, it is likely to face stiff competition from several other investment banks that have also set up infrastructure funds, such as Goldman Sachs and UBS. UK water assets have been sought after by infrastructure bidders because they offer stable returns that can help match the funds’ liabilities.