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UU reveals £40M spend to help smooth transition to AMP6

United Utilities (UU) has reported a £37.1M increase in underlying operating profit to £641.3M for the year to March 31, 2014. Revenue was up more than 4% to £1.7B over the same period in 2013.

UU's experience in Scotland will place the company in a strong position, says Steve MogfordUU's experience in Scotland will place the company in a strong position, says Steve Mogford

The company invested £836M in its capital investment programme during the year which was £49M more than for 2012-13. It expects to deliver a similar level of investment for 2014-15, including a £40M transitional spend to aid a smoother and most effective start to AMP6.

It said the regulatory capital investment in the year included £165M of infrastructure renewals expenditure.

Commenting on the results, UU chief executive officer Steve Mogford: “Customer satisfaction continues to improve, underpinned by strong operational and environmental performance, and we believe there is scope to deliver further improvements. We are continuing to improve the quality, reliability and resilience of our assets and increased capital investment in our network to £836M this year."

He added: "We are reinvesting around £280M of our outperformance, providing benefits for customers and the environment."

The company said it will submit its revised business plan for 2015-20 by the end of June, and it is working closely with regulator Ofwat on that. UU said two key areas it has been focusing on are wastewater total expenditure (totex) and retail average cost to serve.

It said: "Ofwat’s initial view on wastewater totex indicated a £1.1B difference, compared with our business plan submission. In our submission, we asked for around £1B of wastewater totex to be given specific consideration.

"We are in detailed dialogue with Ofwat to understand this difference and provide any further evidence required to support our submission. We are also revising our outcome delivery incentives to include more symmetrical reward / penalty mechanisms."

The company has been extending its presence in the Scottish water retail market and to ensure it is in a strong position as the business retail market opens up in England in 2017. In Scotland, the company now has 150 customers covering 2,000 sites and it expects this will represent £10M of revenue in 2014-15.

Mogford said: “We have been building our retail capability over the last two years and have rapidly secured a position as the second largest water retailer in Scotland. Our experience in Scotland will place the company in a strong position, in advance of full opening of the English market for business customers in 2017."

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