An Issue-Driven Regulatory Update for the UK Water and Wastewater Supply Chain

October, 2010 - Scotland, Scotland


Title: Transfer of Private Sewers to WaSCs in 2011: Estimated one-off capex of £957 million

• Defra’s August 2010 consultation paper sets out the following key implementation milestones for the proposed transfer of private sewers into the ownership of the WaSCs in England and Wales:
• Transfer of gravity sewers and lateral drains on 1 October 2011; and
• transfer of pumping stations/pressurised or rising mains on 1 October 2016.

• The WaSCs have identified particular health and safety/technical issues with the transfer of private pumping stations, and the separate timetable for transfer of these assets is to allow WaSCs to assess them and programme remedial/replacement works in advance of transfer.
Defra contemplates that this may involve a funded upgrade programme, including re-siting. We anticipate that the WaSCs will be incentivised to tackle this before the transfer takes effect by:
• Logistical challenge of locating and assessing unknown number of pumping stations.
• Risk of prosecution for water pollution from sewer blockages/pumping station failure.
• Risk of claims in negligence for sewer flooding damage- WaSCs will have no legal
certainty as to how long they have to remedy issues with legacy private sewer assets.
• Commercial need to manage sewer flooding costs from GSS payments and cleanup.
• Need to consider impact on pricing review and Insurance Programme renewal.
• Desire to achieve lower whole-life maintenance costs.

Opportunities for the Supply Chain:
• Advance remedial/replacement works- Defra’s estimate of the number of pumping stations to be transferred in England and Wales is 22,000.
• New single national standard going forward- improvement on Sewers for Adoption (SFA).
• Distribution channels- private sewers moving from the realm of micro drain repair businesses to large contractors/integrated systems.

Recommendations for maximising these opportunities:
• Review current framework agreements to assess opportunities/threats to existing business.
• Engage with WaSCs on ongoing basis in relation to national standards to ensure compliance with new rules and allow development of tailored solutions.
• Offer WaSCs technical assistance/partnering in assessing pumping stations ahead of 2016.
• Contractors may wish to consider strategic alliances with drain repair businesses, to ensure that they can provide WaSCs with branded small bore pipe expertise on a seamless basis.

"These changes represent significant practical challenges for the WaSCs. Rightly or wrongly, the transfer of private sewers will only serve to heighten public perceptions of the WaSCs’ responsibility for all aspects of domestic drainage, and they have to be mindful of the impact on their brands if they are perceived to neglect vulnerable members of the community. The transfer of pumping stations will also stretch their resources, but there is a huge amount of expertise in the supply chain for them to tap into via a range of agreements. You’re talking there about assessing, servicing, upgrading and integrating pumping systems- that’s exactly what we do."

Bob Went, Group Consultant at ITT Water & Wastewater

Competition in the Regulated Water Industry: The Supply Chain and Defra’s 2011 White Paper

There has been endless debate about the need for more competition in the regulated sector (most people agree that there is plenty in the supply chain already!), but the expected White Paper in Summer 2011 should finally shed some light on whether we can really expect to see new entrants to the water and sewerage business in England and Wales, as well as in Scotland. We think the supply chain should be getting involved, because:

• Contractors and service providers may have an unprecedented opportunity to expand their offerings into the regulated sector, and occupy new places in the value chain; and • Manufacturers are likely to have a new generation of customers to supply, in a new competitive environment that may place more emphasis on technological innovation.

We are organising a forum to collate ideas to feed into Defra as it prepares the White Paper- please see the contact details below if you would like to participate in that process, or have any queries.

Key Water and Wastewater Contacts
Guy Winter - Corporate Finance
Guy advises a variety of companies, institutional investors and management teams in the UK water and wastewater supply chain on corporate matters, including public and private M&A, private equity, reorganisations, joint ventures and equity capital markets.
DL +44 (0)20 7429 4681 E [email protected]

Angus Rollo - Corporate Finance
Angus has a wide range of experience of M&A and JV transactions in water and wastewater, covering both regulated and unregulated undertakings. Angus has also been involved in a number of private equity and growth capital transactions in the sector.
DL +44 (0)20 7429 4988 E [email protected]

Lynne Scott - Construction and Special Projects Lynne specialises in engineering and infrastructure projects. She has advised both public and private sector employers and contractors on a number of wastewater projects and has extensive experience of advising on framework agreements.
DL +44 (0)20 7429 4956 E [email protected]

Gordon Downie - Regulation
Gordon is recognised as an expert in utilities, particularly water, regulation. He has guided regulators and the companies they regulate through various industry reforms, including the creation of competitive water and wastewater markets in Scotland.
DL +44 (0)131 473 5162 E [email protected]

Fiona Parker - Regulation
Fiona advises water clients such as the Water Industry Commission for Scotland and the Northern Ireland Authority for Utility Regulation on the ownership, management and charging arrangements for water resources.
DL +44 (0)131 473 5151 E [email protected]


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