Ofwat close Yorkshire Water case after shareholders cough up £100m to reduce storm overflows
Industry watchdog Ofwat has closed its enforcement case against Yorkshire Water, after the supplier agreed to recover loans worth nearly £1bn and shareholders committed £100m to reduce spills from storm overflows.
The water supplier has agreed a structured plan to strengthen its financial resources in the interests of customers.
This will involve Yorkshire Water calling in two loans that it had made to other companies within its wider company group, totalling around £940m.
The company has also made commitments, while shareholders will invest £100m to improve its handling of water spills.
Ofwat has now closed its investigation and will monitor whether the supplier honours its new commitments.
Ofwat secure concessions from water supplier
The water regulator opened the case due to concerns about the loans Yorkshire Water had made to other companies within its wider company grouping.
Ofwat wanted to ensure these inter-company loan arrangements complied with requirements in Yorkshire Water’s licence that are intended to protect customers and ensure that the regulated company has the resources it needs to deliver its services effectively.
This included having appropriate consent from Ofwat for such loans.
In November 2021 Ofwat’s “Monitoring Financial Resilience” report determined that Yorkshire Water had weak levels of financial resilience.
It argued the supplier had work to do to strengthen this to the level expected of a provider of essential public services – as financial flexibility was essential to boosting customer service and performance issues.
During the investigation, Ofwat confirmed Yorkshire Water took steps to address concerns about the loans.
It says that the structured repayment plan and additional commitments Yorkshire Water has put forward have addressed these concerns, and secured benefits for customers.
David Black, Ofwat Chief Executive, said: “Companies must be financially resilient if they are to tackle the challenges that affect customers and the environment. We are pleased that Yorkshire Water recognised our concerns and is taking these active steps to improve its financial position in the interest of customers.
“We welcome the additional £100m shareholder funded investment to take urgent action to reduce spills from storm overflows.”
Earlier this week, Sir James Bevan, chief executive of the Environment Agency, warned it would cost £100-200bn to fix the UK’s network of pipelines, reservoirs and treatment works to develop a modern system that separates sewage and rainwater.
He explained to the House of Lords that the Victorians first established the UK’s sewer overflow system.
It is designed to divert water and diluted sewage in times of high rainfall into large bodies of water such as river and seas – however, it was also exacerbating sewage spills amid storm overflows.