SES Water open letter in response to Ofwat report Dec 2021
SES Water response to Ofwat's Financial Resilience reports
Earlier this week Ofwat published its assessment of water companies’ financial resilience and performance against Ofwat’s commitments to customers for the financial year up to 31 March 2021. This is part of Ofwat’s normal annual review of industry performance.
SES Water was named as one of three water companies that Ofwat highlighted as having “lower levels of financial resilience” compared to other companies and as one of five water companies “lagging behind” on meeting targets for our customers.
While we respect Ofwat’s opinions, there are times when we strongly disagree. This is one of those occasions.
The Board of SES Water is absolutely confident that the company’s financial standing remains strong and it has recently taken positive steps to further improve the strength of our finances, particularly in light of the COVID-19 pandemic.
These steps have included:
- extending our credit facilities so we can borrow money as and when required to manage financial shocks arising from the pandemic;
- removing certain requirements associated with our main bond ahead of when we start repaying it in 2027. This has improved our finances and improved our ability to access further funding if we need it;
- with strong support from our banking partners and shareholders, we have started the process to fund our capital programme activity through to 2025 and we are confident this will conclude during Q1 2022.
Furthermore, one of the key measures used to assess individual water companies’ financial standing is their credit rating – an assessment of credit worthiness. Our credit rating has improved since March 2021. The rating agency Moody's upgraded us from a “Baa2 negative” rating to “Baa2 stable” in October 2021, which is a good rating. Ofwat do not appear to have reflected this in their conclusion.
We remain open and transparent about how we are financed and governed. Earlier this week, we published our annual ‘Keeping It Clear’ booklet for the third consecutive year, which is an easy-to-follow guide on our finances, company structure and how we make decisions.
We have responsible shareholders who put the interests of our customers and the environment first. Like any investors they expect a return on the equity they put in and over time they have taken a fair level of dividend. Dividend levels are agreed each year by the Board and take into account how well we are performing against a range of targets, both financial and the commitments we have made to our customers.
The global pandemic continues to test us and this can be seen in our performance against some of our targets. However, we are proud of our achievements since March 2021:
- We have prioritised the wellbeing of our employees and customers, despite the challenges this has created. There have been countless examples of our people going above and beyond to ensure our customers receive the service they expect and rely upon;
- We continue to support our vulnerable customers. Almost one in twenty of our customers are registered on our Priority Services Scheme. Our payment support schemes include up to a fifty per cent discount for low-income households and a payment pause scheme for people who are struggling financially;
- We have one of the lowest leakage levels in the industry. We have met our leakage targets for the past 24 years and we continue to work hard to deliver against the biggest annual leakage reduction challenge the Company has ever faced;
- We have invested in several important mains replacement schemes across our supply area, including in Redhill where we have laid more than 1.5 kilometres of new water main to support the significant new building development in the town.
We know there are areas where the service to our customers needs to improve, but as we outlined in our half year statement published on 30 November 2021:
- We continue to improve our overall customer service performance. In the Quarter 2 C-MeX report we ranked 11th, up from 16th in the previous quarter. We also improved the satisfaction of customers in direct contact with us every quarter last year, showing the biggest overall improvement in the sector. We are confident we will improve this score even further, following the launch in September of Aptumo, our new customer billing platform. We will also launch a new digital customer platform in the new year which will give customers easier access and control over how they manage their bills online;
- For our D-MeX score with developers, we are responding more quickly to developer applications, keeping them updated on progress and better tailoring our service to meet their needs;
- We are working hard to reduce the number of ‘voids’ – properties where customers are connected to our network but not charged for any water – across our supply area. We are taking a range of measures – including door-to-door visits to residential properties – to reduce this from the current ‘voids’ level of 4.17% properties down to our 2.7% target.
Both myself and Jeremy Pelczer, the chair of our Board, will discuss these matters with Ofwat directly and clarify our position with them.
I want to re-assure all our customers, employees and supply chain partners that we remain confident in both our financial standing and performance.
We remain determined to get the right results for our customers and the environment.
Chief Executive Officer