Low rainfall lifts investment from water companies

The cash interest cover ratio of UK water industry fell slightly to 4.4 in 2010/2011, from 4.9 in 2009/10, referring to the sustainability indicator of the industry produced by Water UK.The indicator assesses whether cash flow into a company is sufficient to pay the interest on its debts, and is calculated as a ratio of the number of times gross interest payments are covered by revenue.

With stable interest rates, this fall in cash interest cover largely reflects the impact of increased borrowing by the industry to carry out a major investment and capital works in the coming years. Other than the upgrading of sewers,some water companies are investing in drought mitigation schemes due to the potential risk from drought.

Experienced the driest spring for 100 years in 2011, which is characterized by the Met office, and a mild winter, fears for drought continue in 2012, a number of water companies express their concerns over a shortage of water supply due to the scarce rainfall forecast for the new year, and are starting to prepare for it.

It is admitted that there is a risk for restriction with water usage. according to the statement of water companies, once the rainfall is not satisfactory, up to half of all households in the UK could face restrictions imposed due to a drought next year. Water usage on sprinklers, hosepipes, washing cars would be primarily affected.

In the drought prospects for winter and spring for 2011/12 produced by environmental agency, water companies on different position stated their possible actions, including applying for drought permits, investing in drought mitigation schemes, increasing leakage detection and enhancing customer awareness.

The dry weather in 2011 has affected most of southern, central and eastern England. Impacts included a higher than average number of environmental incidents such as fish rescues and algal blooms, reduced cereal and potato yields, wildfires affecting valuable habitats, navigation restrictions and water companies making additional efforts on leakage reduction and working with their customers to use water wisely. There were some positive effects too especially from the warm sunny spring, with good soft fruit crops and early potato harvests.



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