CORPORATE

• From: Vol 4, Issue 10 (October 2003)
• Category: Need to know
• Region: Europe
• Country: France
• Related Companies: American Water Works, Anglian Water, AWG, Bayer, Bechtel, Berlinwasser, California Water Service Co (Cal Water), Credit Suisse First Boston, Deloitte & Touche, Dwr Cymru, ECO Resources, Eurawasser, Gelsenwasser, General Electric/Osmonics, International Water (IWL), Kellogg Brown & Root, KPMG, Lahmeyer International, Macquarie Bank, Middlesex Water, Mitsui & Co., Moody’s, Nalco, Northumbrian Water, Ondeo, Pennon/South West Water, PricewaterhouseCoopers, Royal Bank of Scotland, RWE, RWE/Thames (Water), Saudi British Bank, Saur, Saur/Bouygues, Schwab Capital Markets, Severn Trent Water, Société Générale, South East Water, Southern Water, Standard & Poor’s, Suez, Thames Water, United Utilities, US Filter, Veolia, Wessex Water and Yorkshire Water

The quoted British water companies seem to be faring a little better. AWG, Severn Trent and Pennon each came in with relatively upbeat trading statements as they closed their first-half accounts at the end of October.

All have their eyes on the regulator’s price review for the 2005-2010 price review period. Submissions are in and negotiations have begun but three firms, AWG, Northumbrian and United Utilities, have asked to be able to increase their prices a year earlier to take account of increases in non-payment and higher levels of spending. Meanwhile Ofwat has published a ranking of water company service for 2002/3:

1. Dwr Cymru .................405
2. Wessex .......................403
= Yorkshire ....................403
4. Anglian ........................395
5. Severn Trent..............394
6. Thames.......................391
7. Southern.....................384
8. Northumbrian ............379
9. United Utilities ...........336
10. South West ..............329

The big mover is newly quoted Northumbrian, which was ranked top in 2001/2.

Germany: RWE has announced a new sales structure to enable it to sell water alongside gas and electricity in those continental European markets where the same municipal customer is responsible for all three utilities. The change will not pull any staff out of the Group’s Thames Water subsidiary: it involves the merger of the gas and electricity sales forces in six German regions and six continental European regions, giving them the ability to sell water as part of
their portfolio, a spokesman said.

France: Half-year results in from Veolia and Suez showed falling revenues from their respective water businesses – and massive write-downs. Veolia is taking a .2bn hit to ease the pain of selling its parts of US Filter (see p.14). Suez has charged €2.1bn against its profit and loss account to reflect the loss made on the sale of its Nalco water treatment chemicals business. Investors have been more impressed by Veolia, however (see Market Insight p.21). The worst news for both Suez and Veolia was the weakening US dollar, which sent otherwise healthy local currency revenues in North America into reverse. Veolia’s contracting business, Veolia Water Systems, which saw revenues down by 16 per cent, seems to have been outperformed by Suez’s parallel operation Degremont, which saw a rise of 4.8 per cent. Both companies seem to have come under pressure on the industrial waste water side and South America was also a black spot for both, with Suez’s group revenues from the region plummeting 41.2 per cent to €833m.

France: Like Veolia and Suez, Bouygues also found it heavy going in the water business in the first half, with total sales down 1.8 per cent to €1,210 million. A 3 per cent improvement in the domestic market appears to have been a high point, with the international water business taking responsibility for the top line decline. Bouygue’s shares spent much of September in decline, reversing only at the end of the month on the announcement of the sale of its UK water company, South East Water, to Macquarie Bank for £426m (see story p.20).