Capital Markets Day 3rd and 4th March 2021 - United Utilities
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Capital Markets Day
3rd and 4th March 2021
United
United
Utilities
Utilities
• Capital
• Capital
Markets
Markets
Day Day
• 1
Excellent performance in a challenging year
Strong financial ESG Accelerating
performance embedded in all capital investment
that we do and delivering
totex
Leading customer Excellent Expect ODI
service and operational outperformance
community delivery; Systems of up to £20m in
engagement Thinking a year 1
differentiator
United Utilities • Capital Markets Day • 2
Agenda
Operational
Delivering People,
Financing performance
value retail and
update and driving
through ODI
ESG customer
totex performance
ODIs
Phil Aspin Kevin Fowlie Louise Beardmore Simon Chadwick
Chief Financial Commercial, Engineering Customer Service and Water, Wastewater and
Officer and Capital Delivery Director People Director Digital Services Director
United Utilities • Capital Markets Day • 3
Manchester
Financing update
and ESG
Phil Aspin
Chief Financial Officer
United Utilities • Capital Markets Day • 4
Financial resilience
Low customer
RCV gearing of Fully funded debtor risk – only
A3 stable pension schemes on a
63% credit rating with low dependency £17m
at September 2020 Moody’s aged >1yr at
basis
March 2020
Access to Delivered
Flexibility
efficient financing >£500m financing
and headroom
driving outperformance
through economic
financing in each of AMPs 5
cycles
outperformance and 6
United Utilities • Capital Markets Day • 5
Financing performance
Existing debt locked in at rates favourable to
the AMP7 allowed cost of embedded debt
RPI-linked CPI/CPIH-linked Fixed Floating
• £2.4bn financing to raise in AMP7
9,000
8,000 • £600m raised in H1 at attractive rates
7,000
6,000 • Liquidity extended out to
September 2022
£million
5,000 2.5% 2.4% 2.2% 2.3% 2.4%
4,000
(0.2)% (0.2)% (0.2)% (0.2)% (0.2)% • Central bank stimulus supportive
3,000
2,000
1.3% 1.3% 1.3% 1.4% 1.4% • First CPIH swap
1,000
- • Launched sustainable finance
2020/21 2021/22 2022/23 2023/24 2024/25 framework replacing green EIB funding
The rates shown are real rates for the index-linked debt and nominal rates for the fixed rate debt.
Floating rate debt will be progressively fixed in line with 10 year reducing balance hedging policy.
United Utilities • Capital Markets Day • 6
Sustainable financing based on strong ESG credentials
£300m More than
notional 3x over-
amount subscribed
2 days’
Long-8yr engagement
term, maturing Sustainable with c50
October 2029 Finance Framework institutional
investors
launched in November 2020
replacing green EIB funding no
0.875% longer available 31%
coupon, allocation to
lowest ever 8yr+ investors
Issued debut sustainable
GBP corporate outside of
coupon bond in January 2021 the UK
UKT+68bps, Notable first
zero new issue time investors
premium in the credit
United Utilities • Capital Markets Day • 7
Reporting complexities require normalisation
Underlying AMP6 RoRE of 7.99% Definition of net debt to include or
1 – 99bps higher than reported RoRE 2 exclude derivatives – can impact
calculation of financing outperformance
Financing performance
2.12%
ODI performance2
0.24% Alternative performance measures
3 (APMs) – different presentations can
impact underlying earnings
Totex performance1
0.09%
Base return IAS19 allows for different assumptions
5.54% 4 for pensions – can impact sum of the
parts valuations
1 Includes wholesale totex and retail cost performance
2 Includes wholesale ODI and SIM performance
United Utilities • Capital Markets Day • 8
Protecting and enhancing the environment
A top performer Sector leading Overall
on EPA catchment management performance
Leading performance in minimising
Led sector’s approach to Zero serious pollution incidents in 2019
pollution in AMP6
catchment management and 2020
On track for 4* industry leading through SCaMP Industry leader with 90% self-reporting
status on the Environment Agency’s
Catchment Systems Thinking of pollution incidents in 2019
environmental performance
enhancing the region’s natural 100% wastewater discharge
assessment for 2020
capital compliance in 2020
United Utilities • Capital Markets Day • 9
Managing climate change
Future targets aligned
to the Paris
• Reduced our carbon footprint by 73% since 2005/06 Agreement’s more
ambitious objective to
limit global warming
• Over 95% electricity from renewable sources, to 1.5degC above pre
industrial levels
rising to 100% in 2021
• Maintained our position in the leadership category in the CDP Climate
Change 2020 report, making United Utilities a leader in Europe and the
non-energy utilities sector
• 11th in the 2020 FTSE leaderboard of
the Sustainability reporting performance
report published by EcoAct
• Backed the water sector’s ambition
to hit net zero by 2030
United Utilities • Capital Markets Day • 10Delivering for society – customers
£71m voluntary funding for
financial assistance in AMP7
Helping 145,000 customers through
financial support schemes
Increased eligibility for social tariff to
help a further 45,000 customers
114,000 customers supported through
Priority Services scheme
On track for C-MeX reward
United Utilities • Capital Markets Day • 11Delivering for society – colleagues and communities
85% £35m
employee to
engagement communities
in AMP6
200 Social
mental health Mobility
and wellbeing Pledge
champions signatory
Colleagues Communities
Charitable
Targeting support including
zero accidents 600,000 meals
by 2030 provided by local
foodbanks
269 16,500
employees children
from graduate benefitting from
or apprentice educational
schemes resources
United Utilities • Capital Markets Day • 12Responsible governance
Corporate Innovation Responsible finance
governance Industry leading approach / A3 credit rating with Moody’s
Annual compliance with UK most embedded culture of
63% gearing
Corporate Governance Code innovation (Ofwat)
(at 30 September 2020)
Multiple winner of PwC Public Three Innovation Labs launched
Secured Fair Tax Mark
Trust Reporting awards to support, foster and work in
partnership with innovators Pensions scheme has achieved low
£350m additional investment from
dependency
AMP6 outperformance improving 31 teams taken part in CEO
resilience and services challenge Sustainable Finance Framework
published
“World Class” on Dow Jones £445m expected savings from
Sustainability Index for 14 innovation between 2010-2025
consecutive years
An investor guide to UU’s ESG approach is available:
https://www.unitedutilities.com/globalassets/documents/pdf/united-utilities-esg-booklet-2020.pdf
United Utilities • Capital Markets Day • 13Hallbank: HA connection
Delivering value
through totex
Kevin Fowlie
Commercial, Engineering and Capital Delivery Director
United Utilities • Capital Markets Day • 14Asset planning
1. Monitor & respond 5. Refurbishment
Accept the current level of risk, define and agree an appropriate Major refurbishment of existing assets to prolong asset life and
level of monitoring. Develop a local contingency plan restore performance capability to original design
2. Operational intervention 6. Replacement
Review and enhance the current operational Replace assets on a like for like basis, restoring
and maintenance interventions to maintain the original performance capability. Should not
asset performance require detailed design
3. Optimisation 7. New asset
Improve asset performance capability by reviewing Capital investment on new or additional assets
operating parameters for the asset, site or wider to meet performance standards, enhanced
system and optimise parameters to improve reliability or a more cost beneficial solution.
performance. This may also involve changing This will require a design element
operational and maintenance regimes
4. Partnership 8. Integrated approach
Collaborative investment shared or wholly Integrated solution across asset boundaries such as process network
provided through a third party with costs and boundary, process bioresources or catchment level solutions. An
benefits shared across all parties integrated solution is a Systems Thinking response and could be a
combination of any of the above solution types
United Utilities • Capital Markets Day • 15Pervasive engineering driving value
Area deployed engineering teams engaged in all processes
Asset monitoring and
optimisation at Davyhulme
Wastewater Treatment Works Route
Proactive leading to lower energy costs cause
analysis
Reactive Optimisation
Capital
Efficiency
projects
Process control changes driving optimisation
TCQI consistently above and compliance benefits
90% 90%; collaborating across
Compliance HAZREV
the business to ensure
projects are delivered on time, to Power clips installed at Herron Bridge to
cost and to the right quality provide real time energy usage, allowing
Health & optimised pump selection and driving cost Regional
Safety projects
savings
United Utilities • Capital Markets Day • 16Catchment Systems Thinking
• Viewing the catchment as a whole system
and managing it as one
• Aligning water company interests with
others:
• Communities
• Businesses
• Local authorities
• Promoting partnerships and delivering in a
consistent way – the right intervention from the
right organisation
• Integrating catchment and asset solutions
to achieve the best results
• Maximising multiple benefits, delivering more
for less
United Utilities • Capital Markets Day • 17Innovation + Digital + Systems Thinking the showcase
The West Cumbria project is providing a new water supply to 150,000 customers
This major investment in a pipeline and new water treatment works is an ideal opportunity to
establish a new benchmark for advanced operation of a water system
Key systems Types of
SR
WSZ004
SR
components benefits
ALLERDALE
Customer Service
SR
SR
Digital
IREBY
SR
SR
SR
Twin
ULDANE
SR
SR
HAY-
SR
BOROUGH
SR SR
WSZ028
WILLIAMS-
GATE SR
HAUSEGILL
SR WTW
SR
BROUGHTON
WTW
WILLIAMS-
GATE
MOOR
SR SR
Totex
SR
STAINBURN
SR
SUNSCALE
SR
SR
EMBLETON
SR
SR
Raw Water LDTM
System
SR
SR
Visualiser
WINSCALES
LORTON from Thirlmere
SR
SR
SCILLY
SR
BANK
SCILLY
BANK
164.3
m
4.6
ML
SR
SR
HIGH LEYS
ODI
SR
SR
HARRAS
MOOR
SR
SR
KELTON
SR
SR
SR
SR
SUMMER-
GROVE
SR
SR
133.9
m
Predictive
SR
2.3
Analyser
ML
Safety & Wellbeing
SANDWITH NANNY-
NANNYCATC
H
CATCH
SR
SR
WILTON COPELAND
WSZ031 & 032
SR
SR
CALDER
System Risk & Resilience
Optimiser
United Utilities • Capital Markets Day • 18Case study: Hallbank Tunnel replacement
Overview of the Haweswater Aqueduct:
• Delivers up to 570 million litres of water every day
• Serving up to 2 million customers
• 35% of United Utilities daily regional supply
• Consists of 35km raw water section and 110km
treated water section
• Diameter of single pipe sections is 2.6m
Hallbank project:
• To relay 1.8km section tunnel and conduit of the
Hallbank section of the Haweswater Aqueduct
• 2.5km of 4 x 1.6m diameter new steel pipes
• Welded in 14m lengths
• Buried up to 8m deep
• Connections into the existing Haweswater Aqueduct
United Utilities • Capital Markets Day • 19Technology and Innovation
Extensive use of 4D modelling to simulate the works
• Simulation of working practice
Reduced
• Covid compliance, social distancing and methodology Over 15,000
construction
• Construction activity and sequencing, hours without
window from
(effectively built the asset in virtual reality) a H&S incident
28 days to
7.5 days
United Utilities • Capital Markets Day • 20Innovation case study: NEREDA
United Utilities • Capital Markets Day • 21People, retail and ODI
performance
Louise Beardmore
Customer Service and People Director
United Utilities • Capital Markets Day • 22Fantastic engaged workforce delivering
strong performance
• UK high performance levels of • Placed 110 out of 15,000 companies
employee engagement across Europe
UK High Leading listed
• The top ranking water company in UK
Performance • Glassdoor top 20 employer company in Statista
Survey in the Financial • 1 of only 5 Utilities
Engagement Times for Diversity and across Europe to
levels United Utilities 84% Inclusion Leadership
make top 150
UK High Performance 84%
UK Average Norm 74%
• Worked with customers and • Inclusion in the index demonstrates our
shareholders to design and now Achieved commitment to gender equality and
launch new LTIP - 50% focused on inclusion in transparency
Pay and ESG outcomes The Bloomberg • Reflects a high level
Performance
• Living Wage Foundation Gender Equality of disclosure and
accredited from Index performance across
1st April 2021 five dimensions
United Utilities • Capital Markets Day • 23Developing skills for now
and the future
• Continued with all of our graduate and • Purpose built technical training academy for 7 years
apprentice recruitment
• We are the only Ofsted registered facility in the sector –
• Now have 230 Apprentices and 36 Graduates ‘Good’
on schemes
• Means we maximise the Apprentice Levy and can
• Further 40 coming into the business in September respond quickly
• This year we are integrating our new Digital Skills
Academy
United Utilities • Capital Markets Day • 24Doing more for the
North West
• Recognising challenges of the North West we were one • Huge supporters of the Social Mobility Pledge taking a
of the first to sign up to the Government’s KickStart leading role in the North West bringing together over
programme 150 businesses
• Bringing in 250 young people who are not in education • We have signed up as one of the companies supporting
and claiming Universal Credit into employment the 10,000 Black Interns programme to offer paid work
experience
• An opportunity to extend
United Utilities • Capital Markets Day • 25Brilliant performance in a challenging year
Best ever
60% of colleagues 1 million ODI performance; Underlying
delivering from customers now 9/10 in reward cash collection
home utilising digital and 3 reputational is performing
channels already well
£15m Social delivered
Leading customer Tariff agreed;
service 145,000 customers £24m of reward
performance helped with already secured
C-MeX and affordability for future years
D-MeX support
United Utilities • Capital Markets Day • 26Fantastic people delivering brilliant customer service
We are the only listed water company on track for positive rewards on both
C-MeX and D-MeX with over £3.5m reward this year
C-MeX D-MeX
3rd out of 11 WASCs year to date;
4th out of 11 WASCs year to date; firmly in reward
firmly in reward
New team in place driving
Perception satisfaction performed enhanced results
well over summer when
satisfaction across the industry Consistent performance
declined improvement with focus on
customer segmentation and
Highest ranking of the listed tailored service showing
companies real results
United Utilities • Capital Markets Day • 27Fantastic customer service delivery
Service Mark
Mobile App WOW’s Priority Services Accreditation
4.7/5 Over 13,000 Now have 114,000 One of only 18
App store from 5,096 this year customers on our Priority brands with Service
reviews Services Register achieving Mark with Distinction in
Over 50,000 since our reputational ODI the UK
4.3/5 we started
Google Play from commitment for this year
Only UU and Wessex
1,211 votes Google review 4.1 Accredited to the BSI Water achieved the
out of five – Inclusive Service Standard accreditation among all
210,000 users leading listed for Services for Vulnerable UK utility companies
£15 million Customers – reputational
cash this year alone ODI commitment delivered
United Utilities • Capital Markets Day • 2813
ODIs
10 Reward/
Penalty based
3 reputational
9 out of 10 all in
positive reward
All 3 delivered
ODI delivery
only
Voids
Already
£41million Achieved full delivered a
maximum reward for further £24m
reward over year one of of future
AMP £3.9m years
benefits
• Comprehensive data analytics capability where we are
verifying data against multiple indices to check for occupation
• Developed an in house Void App - enabling all our field teams
to report status of void properties at touch of button; gamified
performance driving real competition
• £15,000 cost and delivered in four weeks
• Maximum reward of £3.9m this year, and have delivered a
further £24m of future years benefits
• Revenue, cost to serve benefits now visualising commercial
premises
United Utilities • Capital Markets Day • 2913
ODIs
10 Reward/
Penalty based
3 reputational
9 out of 10 all in
positive reward
All 3 delivered
ODI delivery
only
Customers lifted out of water poverty
£13.65 million Will achieve
90,000
maximum full reward for
80,000 reward over year one of
AMP £2.5m
70,000
No. of customers
60,000
50,000 • Bespoke ODI linked to affordability support for
customers
40,000
• Enable the full AMP reward; 80,000 customers
30,000 lifted out of water poverty by 2024/25
20,000 • Data partnerships with Equifax, TransUnion and the
10,000 DWP pivotal in enabling delivery
• Continue to innovate in this space; the only water
0
company to move into a full pilot with Open
2020/21 2021/22 2022/23 2023/24 2024/25
Banking Capability
Performance Performance commitment
• Could be pivotal in enabling us to help more
Underperformance collar Outperformance cap
customers quickly at a much cheaper cost to serve
United Utilities • Capital Markets Day • 30Delivering further efficiencies in cost to serve
AMP6 Total efficiencies in AMP6 = £165m AMP7
Efficiency Efficiency
Total efficiencies in AMP 7 = £57m
Already Delivering
delivered now
1 2 3 4
Data
Increased Robotic
Metering analytics and
digital process
capability service
delivery automation
segmentation
United Utilities • Capital Markets Day • 31Encouraging cash performance in a challenging climate
• Data led customer engagement strategy enabling us to focus
on high risk customers and customers with furlough status to
target support
• Benefiting from the new debt manager technology
delivered last year
• Introduced additional data share partnership TransUnion (we
already do full data share with Equifax)
• Number of customers on active payment plans increased to
83% of customer base; leading Direct Debit penetration of
listed water companies – security of cash
• The only water company to secure additional social tariff of
£15 million to support and additional 45,000 customers at
the start of Covid
• Now supporting 145,000 customers with affordability
support
• Underlying cash collection performance continues
to perform well
• Uncertainty ahead Furlough unwinding and
unemployment
United Utilities • Capital Markets Day • 32Invested in our credit capability – serves us well
Recognition of collections capability
Leveraging data Segmenting and Exploiting partnerships and
managing risk technology
These awards recognise excellence across the utility and credit industries and reward organisations that have achieved outstanding performance in the
last year. To win or to be shortlisted shows we have reached the very highest standards, as judged by panels of leading independent experts
United Utilities • Capital Markets Day • 33Liverpool
Operational performance
driving customer ODIs
Simon Chadwick
Water, Wastewater and Digital Services Director
United Utilities • Capital Markets Day • 34Year 1 AMP7 operational performance headlines
35% 4 star
54% Lowest reduction in (“industry leading
reduction in water ever level of environmental company”) Environment
pollution Agency performance
supply interruptions leakage incidents rating forecasted
for 2020
100% Zero
23% 94% wastewater treatment
serious pollution
improvement in improvement in incidents for two
works compliance;
water compliance risk water event risk consecutive years;
best in sector
index (CRI) index (ERI) best in sector
performance
performance
Denotes measures that are included or have elements that directly contribute to one or more common ODIs in AMP7
Note: All data is provisional and subject to final signoff with the relevant regulators United Utilities • Capital Markets Day • 35Case study – Sewer flooding
In AMP7 we have a basket of four customer ODIs for sewer flooding. We are forecasting a positive overall flooding outcome
for AMP7 through our work to protect customers from the risk of flooding
Flooding ODIs 5 year reward range (£m) 5 year penalty range (£m) Year 1 forecast (£m) Commentary
1. Internal flooding incidents -35.0 -61.3 -7.2 Measures actual number of flooding
2. External flooding incidents 1.1 -30.9 1.1 incidents at properties
3. Internal flood risk resilience 45.9 -40.7 7.5 Totex investment schemes that remove
future risk of flooding at specific
4. External flood risk resilience 21.2 -20.6 3.1 properties
TOTAL 33.3 -153.5 4.5
Dynamic Network Management (DNM)
To deliver further service improvements for customers we have commenced the
rollout of the world’s most advanced implementation of System Thinking – what
we call ‘Wastewater Dynamic Network Management’. This will fundamentally
transform how we operate the wastewater network.
At the Capital Markets Day in 2020 we were able to share the concept behind this
approach. Today we can reveal exciting progress on DNM; the scale of change, the
level of technology exploitation and the significant customer benefits.
Image taken from UU capital markets day presentation (March 2020)
United Utilities • Capital Markets Day • 36Case study – Sewer flooding
Dynamic Network Management (DNM)
What is DNM? What is the What are the benefits?
This is the most advanced progress so far?
implementation of Systems Thinking in The first phase of testing and development has demonstrated that a machine operated
the water sector and fully integrated digital wastewater network system can predict and prevent issues
Uniquely, this is a fully integrated & Installing This results in a forecast improvement across five customer ODIs. These benefits are in
connected system view, optimising the 16,000 sensors addition to the AMP7 improvement plans already underway for each customer ODI
whole system performance in a - first 800
predictive and preventative way already
operational
Internal Sewer External Sewer
A.I. now Pollution
State of the art Sewer Collapses Sewer Blockage
ingesting data ODI
sensors Flooding ODI ODI Flooding ODI ODI
and identifying (Common)
predictive
(Common) (Common) (Bespoke) (Bespoke)
alerts
Cloud aggregation
Covers the key
54 drainage
+22% +20% +6% +13% +11%
areas
Predictive System (79% of UU
A.I. customers)
United Utilities • Capital Markets Day • 37DNM local system visualisation
Wastewater
System
Connectivity
and Status
view
United Utilities • Capital Markets Day • 38DNM pumping station dashboard
Actual and
predicted
performance
United Utilities • Capital Markets Day • 39Case study – Pollution
An important measure for customers and for the environment. There is a new structure for the customer ODI for
pollution for AMP7. In the last 12 months we have delivered a 35% improvement in performance, establishing further
opportunities for years 2-5 of AMP7
Delivered through
100.00 Systems Thinking
incidents per 10,000km of sewerage network
Number of Category 1, 2 and 3 pollution
90.00
80.00
New hub
70.00 operating
model
60.00
Central
50.00 control
from the
40.00 ICC
30.00
Digitally
20.00 enabled
operations
10.00
Best performance on record Data based
0.00
Year 1 ODI reward of £5.7m incident
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 assessment
Note: 2020 data is provisional and subject to final signoff
United Utilities • Capital Markets Day • 40Track record of digital Industry leading Systems Thinking
transformation innovation capability competitive advantage
8 Machine
Intelligences
Created
(AI)
16 custom
mobile apps
delivering ‘Exactly the sort of innovation
operational water companies need to be
performance embracing’: Battery storage
system installed at Preston plant
Robots now
account for 1%
of the UU
workforce
United Utilities • Capital Markets Day • 41Customer ODI guidance
Following the continued focus on improving service to customers, guidance for year 1 customer ODI
performance updated to a net reward of up to £20 million
Penalties Rewards
Key ODIs driving -20 -15 -10 -5 0 5 10 15 20
current year Reducing interruptions to water supply
performance Mains repair
Year 1 forecast performance Reducing water quality contacts
range (P10/P90)
Internal flooding Incidents
Hydraulic internal flood risk resilience
External flooding incidents
Pollution incidents
denotes current
forecast performance Voids
against the range of
No. of customers lifted out of water poverty
possible outcomes
C-MeX & D-Mex
Current forecast performance is subject to change dependent upon performance
United Utilities • Capital Markets Day • 42You can also read
