Thames Water Plans Record Investment From 2010; Bills to Rise

By Nicholas Larkin

Aug. 11 (Bloomberg) -- Thames Water Utilities, supplier to 8 million people in London and the Thames Valley, plans to carry out the biggest investment program by a U.K. water company in the five years from 2010, increasing customer bills.

The utility told industry regulator Ofwat it wants to spend 6.5 billion pounds ($12.5 billion) in the period to pay for customer-service and network improvements as the region's population is expected to grow by more than 380,000 by 2013, according to an e-mailed statement today.

The company said average customer bills are expected to increase annually by about 3 percent above inflation because Ofwat needs to set price limits high enough so companies can pay for the improvements. About half of London's water mains are more than 100 years old and Thames Water predicts the effects of climate change will cut its available supplies by 45 million liters (11.9 million gallons) a day by 2015.

``There will be an inevitable impact on bills, but even so, we will be able to keep them below the industry average,'' Thames Water's Chief Executive Officer David Owens said in the statement. The planned investment will help the company meet tighter environmental and legislative requirements, he said.

U.K. water companies will today submit their draft business plans to the regulator setting out their views on how customer price limits and investment targets for the five-year period should be determined. Ofwat will make a decision next year.

New Reservoir

Thames Water is proposing a new reservoir near Abingdon, in Oxfordshire, which will supply as much as 10 percent of the region's water by completion in 2021. The company will also try to cut the number of homes at risk from sewage flooding by almost a quarter, it said.

Ofwat can impose fines of as much as 10 percent of a utility's regulated revenue for missing targets in areas such as leakage. By 2015, Thames Water wants to reduce leakage by 18 percent, enough to supply more than 750,000 people a day. It said it will install a million more water meters, doubling the amount of metered properties to 54 percent.

The company, which was sold by RWE AG in December 2006 to a group led by Macquarie Bank Ltd. for 4.8 billion pounds, also plans to cut carbon-dioxide emissions by 20 percent.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net