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Many Challenges For Water Industry

14 June 2011

The UK water industry faces many challenges in the years ahead but Costain is well placed to help meet those challenges, says Costain’s Water Sector Director, Graham Keegan.

The Government and industry regulator are tasked with cutting wastage and preserving what is becoming an increasingly valuable resource, while at the same time protecting consumers from paying higher bills.

Add to the mix tighter regulation around water usage and increasingly stringent legislation on carbon emissions and energy efficiency, then there’s no shortage of issues facing the water industry.

"Over the next 10 years we will see more of a focus on energy efficiency, resilience issues around climate change and regulation, regulation change and increased competition driven by OFWAT and DEFRA, and of course increased efficiency demands and customer satisfaction,” said Keegan.

Costain’s strategy for the Water Sector involves building on its market leading position as a company that can deliver capital projects and, given the need for the Water companies to find greater cost efficiencies, continue to provide its customers with innovative solutions, said Keegan.

"The challenges facing the water industry over the next 10 years means companies are going to have to be more adaptable and smarter at meeting the needs of their customers,” Keegan said.

An example of this could be assisting water companies, which have large and disparate estates, with the introduction of renewable energy using photovoltaic panels, hydro electric devices or wind turbines, said Keegan.

The UK Government has a legally binding target to ensure that 15% of the UK’s energy demand comes from renewable resources by 2020.

Opportunities will also arise from water companies looking for greater efficiencies in repair and maintenance projects. As OFWAT demands greater efficiency, water companies will be forced to reassess the methods they employ to deliver their capex programmes.

Costain’s reputation in the Water Sector was recently bolstered with the announcement of two contract extensions, one with United Utilities and the other for Severn Trent, under the Asset Management Programme 5 (AMP5).

For United Utilities, Costain will, as part of the Costain, Galliford Try and Atkins joint venture, undertake over £200million worth of work to upgrade and extend Sandon Dock sewage treatment works in Liverpool.

In terms of Severn Trent, Costain will work with Severn Trent and other non-infrastructure contractors, to undertake a programme of major schemes to a value of £187million. The work will include a number of design and build wastewater schemes.

While competition in the sector remains fierce, Costain has a strong track record of working with the 10 major water companies in England and Wales, ever since AMP2 in 1995.

The overall capex spend in AMP5 in England and Wales is expected to be £22.1billion, with a slightly lower figure allocated to operational expenditure spending. Early predictions for AMP6, which begins in 2015, indicate no reduction in these levels of investment.
"Opportunities will be considerable for contractors who can adapt and embrace innovation to drive efficiency savings across the full spectrum of service offering, from front line maintenance activities to full scale capital projects,” said Keegan.

"Gradually, the nature of the work is going to change, with a greater emphasis on capital maintenance over capital enhancements, and we’re already seeing that happen,” Keegan said.

In the short-term, Keegan says the Government’s White Paper, due to be published by the end of 2011 before being passed into law in 2012, will set out the Government’s plans for the water industry and address the challenges facing the industry including future resource needs, charging and affordability.

"The White Paper will only cover England but will determine how the water companies act in securing water sources in the future, respond to increasing competition, drive innovation and incentivise water conservation,” said Keegan.

"It’s certainly an exciting time to be working in the Water industry and we feel Costain is very well placed to help address the challenges in the years ahead,” said Keegan.