Water firm happy not to be making waves

Northumbrian Water is one of the country's least headline grabbing utilities - for all the right reasons.

Northumbrian Water is one of the country's least headline grabbing utilities - for all the right reasons.

Serving 2.6 million customers across the region, as well as 1.7 million in the South-east under the brand name Essex & Suffolk Water, the FTSE 250-quoted utility is widely regarded as one of the UK's best performing water companies.

"I read an article the other day on our latest financial results saying that we are like a water company should be - nothing much happens," states John Cuthbert, its chief executive.

"In a way that's exactly what we're about."

Mr Cuthbert is very proud of the company's ability to maintain its course whatever the corporate ownership structure at the time.

"We've been lucky in that we have been able to carry on what we do best whoever owns us at the time," he says.

"As a public service, the water business is something that has to be taken very seriously. It's also a very local business. You need to be innovative in continuity."

It was the mid-1980s mergers and acquisitions boom that signalled a prolonged period of corporate shuffling that helped to create Northumbrian Water (NWL) as it is today.

Although privatisation of the country's water industry played a key role in NWL's development, it was the acquisition of Newcastle & Gateshead and Sunderland & South Shields - two of the country's few private water-only companies - in 1989 by French utility giant Lyonnaise des Eaux that represented the biggest catalyst for change.

In 1992, the two utilities were merged to form North East Water, but a bigger merger came in 1995 when Lyonnaise bought Northumberland Water Authority (privatised and floated as Northumbrian Water Group) for £823m.

A year later, North East Water and the former water authority were merged to create Northumbrian Water.

In 2000, two other merged private water-only companies under the ownership of Lyonnaise were merged to create Essex & Suffolk Water and a group-wide structure.

Meanwhile, Lyonnaise was bought by a rival, Suez, but the merger was short-lived. Suez, suffering from a cash crisis, decided to sell 75% of its stake in Northumbrian Water Group.

Taking advantage of the situation, NWL listed on the junior stock exchange AIM in May, only to migrate to full listing some four months later.

"Northumbrian Water has been a first in many ways," says Mr Cuthbert.

"We were one of the first water companies to de-list - and one of the first to come back to the market."

The picture was to change again in 2005 when Suez decided to sell its remaining 25% share, now owned by one of Canada's biggest pension funds - the Ontario Teachers Pension Plan.

Since NWL's flotation, share value has climbed steadily from an initial price of £1 to around the £3 mark.

The achievement is one that Mr Cuthbert, who joined in 1992, is proud of.

"Our philosophy is to stick to our core business by focusing on what we do and working to provide the best possible standard of water provision in the North-east," he says.

"We also see ourselves as a local company, and try to maintain and create new ties with the community. We give opportunities to our employees to take time out to do something important in their community. We also support local organisations such as the Bowes Museum."

He says the company is involved in helping to shape a better North-east through membership of organisations such as the Confederation of British Industry, Northern Business Forum and Business in the Community.

"The North-east has few plcs. We want to show that those headquartered here are among the best in the UK."

That ambition is certainly reflected in NWL's reputation for self-improvement.

Not only has its spent some £1bn in the past five years maintaining existing infrastructure, it plans to double that investment by 2010.

Projects include a £20m facelift for the Bran Sands effluent treatment centre on Teesside. The project will help to extend the plant's operational life and efficiency.

"Bran Sands is an example of the level of investment we are making in the region," says Mr Cuthbert.

"We are also making significant investment in new technology including the installation of sensors in the region's sewerage system.

"This means we can detect in real time, any changes in water levels, either enabling us to spot potential problems which need addressing in times of low risk and problems which need immediate action in times of high risk.

"As recent years have shown, whether it's as a result of global warming or not, flooding is now difficult to predict as weather patterns have changed. This system gives us the information to better react."

But it seems the investment, does not come with a high price tag.

"Prices have gone up, but in real terms by 2010, water bills in the North-east will be lower than they were in 2000 and the lowest in the country."

The group also provides international water and waste-water management with contracts in Scotland, Ireland and Gibraltar.

Another arm of the business, SA Agrer NV, carries out studies and provides assistance for design and implementation of projects in the framework of international co-operation and partnership agreements.


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