Wessex Water Services

Procurement policy
Wessex Water has set up a partnership with Montgomery Watson Harza, called MWH Wessex. This will be responsible for delivering about £390m of investment in water and sewerage improvements over the three-year period to March 2005. Wessex Water holds 51% of this joint venture.

MWH Wessex has entered into alliances with key contractors to deliver its capital programme and encourage long-term, sustainable relationships. These alliances are with TJ Brent, Costain, MJ Gleeson and EarthTec Engineering.

If Wessex Water and Montgomery Watson Harza both agree, this joint venture will be extended to cover the next five-year review period, April 2005 to March 2010.

Current and future projects
Ofwat agreed with Wessex Water that the company would invest £765m over the five-year period April 2000 to March 2005 on upgrading, renewing and maintaining its water and sewerage assets. In current prices, this equates to about £850m. The company is expected to make some efficiency savings on its capital programme, which should reduce the total to £775-800m, or an average of £155-160m a year.

About half of the capital programme is directed towards improving sewage treatment and nearly a third will help to maintain water and wastewater assets. Actual investment in the first two years was below plan, so the company is expected to increase its expenditure this year and in 2003/04. The programme could fall in 2004/05, the last year of the current review period.

In the six-month period to September 2002, Wessex Water invested £70m on its capital programme, more than 35% up on the same period in 2001.

At the halfway stage of the current investment programme, AMP3, the company has already completed work on 71% of its combined sewer overflow programme. Work is planned to start in March on a £28m scheme in Bath to eliminate unsatisfactory combined sewer overflows and provide an environmentally sustainable sewerage system. This project is expected to be complete by the end of 2004.

Essential information
Following the financial collapse of Enron, the company's Azurix division sold its Wessex Water operations to the Malaysian company YTL Corporation Berhad of Kuala Lumpur for £1.24bn.

Like all regulated water and sewerage companies in England and Wales, Wessex Water is working with Ofwat to develop its investment plans for the five-year period starting in April 2005. In developing this programme, the regulator is looking to get water and sewer companies to even out their investment programmes. In the past, companies' capital expenditure fell, often sharply, in the first year of the five-year review, rose over the next three years, and levelled off in the fifth year. In order to promote a longer timescale over which to plan investment programmes, the regulator has announced that franchises will now run with a cancellation period of 25 years.