affinity water business plan

Taking care of your water .cls-1{fill:none;stroke:#fff;stroke-linecap:round;stroke-linejoin:round;stroke-width:8px;}

Annual Report and Financial Statements for the year ended 31 March 2023

Daily amount of drinking water supplied

Customers served

Household properties connected

£ 323 . 3 m

Lengths of mains network

Number of employees (excluding directors)

Number of water treatments works

£ 14 . 0 m

Operating Profit

Our Regulatory Capital Value (RCV)

Planned AMP7 investment

-£ 22 . 9 m

£ 100 . 9 m

Net loss (after tax)

We're taking care of your water now and for the future.

Our purpose .st20 { fill: none; stroke: #C7EF00; stroke-linecap: round; stroke-linejoin: round; stroke-miterlimit: 10; }

We supply high quality drinking water and take care of our environment, for our communities now and in the future.

Our vision .st20 { fill: none; stroke: #C7EF00; stroke-linecap: round; stroke-linejoin: round; stroke-miterlimit: 10; }

Our vision is to be the UK's leading community-focused water company.

Our principles are fundamental values that underpin everything we do

Each person at Affinity Water is guided by our principles - doing the right things for customers and delivering against our commitments and promises.

Our sustainability

Our purpose is to provide high-quality drinking water and take care of the environment for our communities now and in the future. Sustainability is embedded in our strategic thinking as a business and integrated in our daily activities.

Ensuring Environmental Social Governance (ESG) is an essential part of everything we do

ESG performance is essential to how we deliver our purpose and operate in a responsible and sustainable manner. It is part of the way we embed sustainability within our business, we use the environmental, social and governance (ESG) themes to understand both risk and the opportunity to add value.

Using a multi-capital approach

Our capitals are the resources and relationships available to us. They are the inputs to our business that we transform through our decision-making process and operating activities into our strategic outcomes. We are starting to use the concept of capitals to guide our decision-making, for example, when considering land use and weighing the interests and benefits of recreation and biodiversity enhancements.

Planning for a sustainable supply of high-quality water, whilst taking care of the environment, now and in the future

We engage with thousands of customers and stakeholders to help shape both our long-term water resource plans and shorter-term five-year business plans. Our long-term plans act as a roadmap for our shorter-term plans, which outline the investments we need to make and the price we can charge for water

Our plans address the challenges posed by climate change, population growth and the demand for water enabling us to continue to provide a sustainable, reliable supply of high-quality water and to take care of the environment.

Climate change adaptation

Our customers and regulators expect us to act in the face of climate change. That means being a responsible steward of our local environment, reducing our own carbon emissions, and making sure we're prepared to operate within the context of a changing climate.

Preparing for a net zero future

We have set ourselves the challenging target of achieving net zero for operational GHG emissions by 2030.

In the long term, we have an ambition to become fully net zero by 2045, ahead of the UK target of 2050.

Our commitment to public value

At Affinity Water, we are driven by our purpose of providing high-quality water and taking care of our communities environment now and for the future

We are privileged to provide an essential public service and the opportunities that brings, to create value for the areas we supply, to help improve the environment, support the local economy, invest in our communities and adapt to the challenges that climate change is bringing to our region.

EU Taxonomy

Principles of responsible investment

EU Taxonomy is a classification system, establishing a list of environmentally sustainable economic activities.

It is a tool to help financial institutions and large companies in the EU navigate the transition of their assets to low carbon, scale up sustainable investment and implement the European Green Deal objectives, including the 2050 climate-neutrality target.

The system provides companies, investors and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable

Our review by an independent third party established that 100% of Affinity Water activities are eligible under the EU Taxonomy guidelines, and 88% of those activities can be considered as environmentally sustainable 1 .

1 Our review was completed in January 2023, based on 2021/22 performance and independently verified by Anthesis, a specialist ESG reporting consultancy who undertook an audit of Affinity Water activities. Our next review will be completed by end of calendar year 2023.

Our owners, DIF, HICL Infrastructure Company Limited (advised by InfraRed Capital Partners Limited) and Allianz Capital Partners on behalf of the Allianz Group, all follow the Principles of Responsible Investment ('PRI') the world's leading proponent of responsible investment. We align to these principles and report annually on our ESG performance.

The PRI works:

• to understand the investment implications of environmental, social and governance ('ESG') factors;
• to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions.

The six Principles for Responsible Investment offer a menu of possible actions for incorporating ESG issues into investment practice.

Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.

Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.

Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.

Principle 4: We will promote acceptance and implementation of the Principles within the investment industry

Principle 5: We will work together to enhance our effectiveness in implementing the Principles.

Principle 6: We will each report on our activities and progress towards implementing the Principles.

We are committed to the recommendations of the Task Force on Climate-related Financial Disclosures ('TCFD') providing our stakeholders with transparent information on climate-related risks and opportunities that are relevant to our business.

The United Nations SDGs ('UNSDGs') are a blueprint for achieving a better and more sustainable future for all. The 17 related goals address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, innovation and responsible consumption. However, there are nine UNSDGs where we believe our contribution is particularly aligned, and these influence our thinking. We have set these out throughout our Strategic Report to highlight where we feel we are contributing towards the goals.

Third year of our 2020-25 business plan

Every five years, water companies produce business plans that set out the performance commitments they will make over a five-year period. These plans are shaped by customers and other stakeholders based on what they want their water company to achieve.

Supplying high-quality water you can trust

Our performance in 2022-23

• Compliance Risk Index (CRI): We scored 1.092 for the 2022 calendar year, within the dead band of 2 (lower is better, prior year score 0.87). We did not exceed compliance at our treatment works, the first time we have achieved this. We exceeded only three times at storage facilities, our best performance in over eight years. In 2022, we returned to a fully randomised network sampling programme, following two years of Covid-19 restrictions. CRI is the measure the industry uses for water quality, and is designed to illustrate the risk arising from failures in compliance for treated water.
• Customer contacts per 1,000 population for water quality: We achieved a contact rate of 0.56 on a target of 0.67. This is our best performance to date, improving on our 2021/22 score of 0.75. Our performance continues the improving trend that we saw prior to Covid-19 restrictions.

Link to KPI

Water quality

Making sure you have enough water, whilst leaving more water in the environment

• Leakage: We reduced our leakage by 15.8% [based on a three-year average from our 2019/20 position]. This reduction compares to a year-end target of 14%. This the first year of the AMP we have been able to achieve our target, reducing leakage by a further 9.3Ml/d in 2022/23.
• Per Capita Consumption (‘PCC’): Our yearly PCC (domestic water use) increased by 3.6l/p/d from last year. This may in part be attributable to the exceptionably hot weather over the summer. On a three-year average basis, PCC has increased by 4.3% [since base year 2018/19] and did not achieve the yearly target of 7.3% reduction. Domestic water use increased during Covid restrictions and has remained high since the pandemic. It is unlikely we will achieve this target in the AMP. However, we are doing all we can to help customers reduce their consumption.
• Environment Innovation Projects: We delivered two targeted campaign projects (worth two project units) and four project units out of seven for the Lee catchment project. We have completed nine units in the AMP, on a target of 14 by 2025.
• River restoration: We completed four projects in the year, bringing our total to 23 in the AMP. This is towards a target of 21 projects by the end of 2022/23, and 36 in total by 2025.
• Abstraction Incentive Mechanism (‘AIM’): We reduced abstraction by 1,277ML in the year from environmentally sensitive sites when flows or levels were low. (2021/22 was 430ML).

Providing a great service that you value

• Customer Measure of Experience (‘C-MeX’): C-MeX is a mechanism to incentivise water companies to provide an excellent customer experience for residential customers, across both the retail and wholesale parts of the value chain. We achieved 14th position out of 17 companies assessed for C-MeX. Our score for the year was 74.59, compared to the industry median of 79.08. We reported 14th position in 2021/22.
• Developer Services Measure of Experience (‘D-MeX’): D-MeX is a mechanism to incentivise water companies to provide an excellent customer experience for developer services (new connection) customers. These customers include small and large property developers, self-lay providers (‘SLPs’), and those with new appointments and variations. Our D-MeX score for 2022/23 was 86.36, compared to an industry median of 87.26. We are placed 10th out of 17 companies in the industry league table, slipping two places compared to prior year.
• Priority Services Register: We have exceeded the target of 4.5% of our customers on the Priority Services Register (‘PSR’). In 2022/23, 8.3% were registered on a target of 4.5% (6.5% in 2021/22). During the year, we attempted to contact 98.2% with a target of 90% (90% in 2021/22) and, of these customers, we made actual contact with 55.5%, with a target of 35% (47% in 2021/22).
• Gap sites: We reduced the number of occupied properties not billed by 65 in 2022/23, with a target of 50. In 2021/22, we reduced the number of occupied properties not billed by 74.
• Void properties: We achieved our target of reducing our void properties in the year to 2.02%, with a target of 2.22% (2021/22 reduction of 2.23% with a target of 2.27%).
• Vulnerable customers who said they were happy with our service: Through surveys conducted, 93% (97% in 2021/22) of our customers in vulnerable circumstances who receive financial help said they were satisfied with our service, and 92% (96% in 2021/22) of those that receive non-financial help were satisfied. We achieved the target of 90% for both customer surveys.
• Vulnerable customers who found us easy to deal with: Through surveys conducted, 92% (97% in 2021/22) of our customers in vulnerable circumstances who receive financial help said they found us easy to deal with, and 90% (96% in 2021/22) of those that receive non-financial help were satisfied. We achieved the target of 90% for those that received non-financial help.
• BSI Accreditation: We retained certification for BS 18477 for Inclusive Service Provision.
• IT resilience: We have met the target of less than 1,500 Priority 1 and Priority 2 IT incidents in the year, with 731 incidents (2021/22 was 949 incidents).

Minimising disruption to you and your community

• Mains repairs: Performance in the year was 169.6 repairs per 1,000km of mains on a target of no more than 146.5 in the year (2021/22:100.2). Weather is a strong contributing factor in the number of mains repairs needed in a year. In 2022, we experienced an exceptionally hot summer with a significant freeze/thaw event in winter. Figures cannot be compared directly to the previous year’s without taking this into account.
• Interruptions to Supply (‘I2S’): The number of minutes per property where interruptions to supply were three hours or greater was our worst performance in seven years, at 12 minutes 53 seconds, compared to our target of 5 minutes 45 seconds. Over 10 minutes of the score were attributed to the extreme weather experienced in summer and winter 2022. Underlying performance was strong in this area at just 2 minutes 11 seconds.
• Unplanned interruptions >12 hours: 6,070 properties were interrupted for over 12 hours, on a target of no more than 320 properties. 5,752 of these properties were affected during the winter freeze/thaw event in December.
• Properties at risk of receiving low pressure: We did not achieve the target of 1.51 properties affected per 10,000 connections at risk of receiving low pressure. Performance for the year was 150.93 (2022: 155.466). Performance deteriorated in comparison to 2021/22, predominantly due to the exceptionally hot summer and freeze/thaw event in winter. However, the number of pressure monitoring points we have across our network, combined with reporting guidance conceived more than 30 years ago, makes it unlikely we can ever meet the prescribed target.
• Average time properties experienced low pressure: On average, properties were affected for 2.33 hours in the year, with a target of < 10 hours (2021 /22: just over 1.5 hours).
• Unplanned outage: We experienced 2.09% of unplanned outages across all our treatment works in the year, on a target of < 2.34%.
• Severe restrictions in a drought: We have not achieved the target for severe restrictions in a 1-in-200-year drought scenario, with 67.7% of population being at risk, with a target of 51.9%.
• Delivery of WINEP: We have achieved the requirements for the Water Industry National Environment Programme (‘WINEP’) in the year. This requirement is laid out to improve the natural environment through timely environmental improvements schemes. We also met this requirement in 2021/22.

Mains repairs (due to bursts)

Water supply interruptions >3 hours

Unplanned interruptions to supply over 12 hours

Revenue £m

Operating profit £m

Profit/[loss] for the year £m

Net Debt £m

Regulatory Capital Value (RCV) £m

Cash flow £m

Capital investment £m

Dividends paid £m

The £100.9m loss for 2022/23 is primarily made up of:

Operating profit

£( 150 . 2 )m

Net Finance Costs

£ 23 . 5 m

Net Fair value gain on derivatives

£ 11 . 8 m

Taxation credit

Finance costs have been impacted by the high levels of inflation, as a number of our bonds are index-linked.

We beat our leakage target this year, a milestone we should celebrate. Affinity Water has one of the toughest leakage-reduction targets in the water industry and I would like to thank everyone for their hard work.

I would like to thank all our teams at Affinity Water who have worked incredibly hard to deliver on our challenging performance commitments and work through record breaking summer temperatures, drought and a freeze/thaw event in the winter.

Keith Haslett

Our strategy

The systems that affinity water will work within:, environment, the people that affinity water will work with:, communities.

Leave the environment in a sustainable and measurably improved state.

We will work with our customers and communities to restore the environment into a sustainable state where it can regenerate itself so that it can continue to provide its assets and services to support current and future generations who will enjoy its natural wealth.

Objectives:

• End unsustainable abstraction from chalk groundwater sources
• Achieve net zero carbon by 2045 (and 2030 for our operational emissions)
• Deliver a net gain in Natural Capital

Link to UNSDG

Be prepared for change, and resilient to shocks and stresses.

We will invest with our stakeholders to create a more resilient community able to cope with and respond to an increasingly uncertain future.

• Ensure a resilient supply of water for our customers
• Ensure our physical assets are resilient for the long term
• Ensure our people, processes, suppliers and finances remain resilient

Work with our communities to create value for the local economy and society.

Create a collaborative relationship with all our communities, allowing us to act together with common purpose to deliver a society and environment that are mutually sustainable, based on:

• Building trust and transparency
• Enhancing environmental and social health to provide value to our communities
• Reducing our impact in the water environment

Deliver what our customers need, ensuring affordability for all.

We will develop a constructive, collaborative relationship with our customers which enables us to work together to deliver for the future.

• Exceed customers' expectations for drinking water
• Personalise our services to support different needs and wants
• Take care of our vulnerable customers and ensure affordability for all

Case studies

Our industry leading water saving campaign - save our streams, natural capital - river beane, investing in new infrastructure to help conserve chalk-stream habitats, tackling non-native invasive species, water-saving solutions for new housing developments, building a greener future with the farming community, investing in our network for a sustainable future, new tariff trial aims to make water bills more affordable and help customers use water better, celebrating 25 years working with the chiltern chalk streams project, affinity water one of the first uk water companies to publish open-source environmental data for the public.

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PR24 business plan timeline

We submit our business plan to ofwat..

We formally send our plans to Ofwat for them to review.

Second Your water, your say event - live webinar

We will share how we changed our plan to reflect the feedback we heard as part of our engagement and consultation activities.

Draft determination is published by Ofwat (date tbc)

This is when Ofwat give us an assessment about what they think about our plan and the associated bill.

Final determination by Ofwat (date tbc)

Ofwat will announce the final target for the company and the associate bill impacts for their customers.