Shareholder Executive

Northern Ireland Water

Purpose

Northern Ireland Water (NIW) is the sole water and sewerage undertaker in Northern Ireland providing water and sewerage services to domestic, agricultural and business customers throughout Northern Ireland.

Legal Status and Ownership

NIW is a Government owned Company and the statutory water and sewerage undertaker, operating under licence. It is subject to regulatory oversight by the NI Authority for Utility Regulation and environmental regulators.

As owner, the Minister for Regional Development retains overall policy and political oversight and sets strategic objectives.

Government Objectives

To promote health and well-being and safeguard the environment through significant investment in the water and sewerage infrastructure.

To provide modern, high quality water and sewerage services which will enable Northern Ireland to comply with EC Directives on drinking water and waste water quality.

Through NIW, the Department for Regional Development (DRD) will invest approximately £335m in 2008-09 to achieve higher levels of compliance with EC standards, as well as upgrading existing infrastructure and reducing leakage.

DRD will seek governance structures within NIW which will ensure delivery of agreed water industry targets and promote improved customer service by 2010.

Financial Performance

£m	20081	2007	2006
Turnover	298	-	-
Operating Profit	64	-	-
Profit/(Loss) for the year2	41	-	-
Net Cash flow	5	-	-
Net Operating Assets	982	-	-
RONA	6.5%	-	-
Shareholders' Funds	694	-	-
Dividends	34	-	-

1 Northern Ireland Water Limited, a Government Company, was created on 1 April 2007, following the transfer of assets and liabilities from Water Service, an Executive Agency of DRD. Therefore the company's financial reporting is now governed by UK GAAP rather than public sector guidance for Government agencies. No historic figures have been produced on a consistent basis and so only 2007-08 is shown.

2 Profit stated before the deduction of dividend.

Commentary

The 2007-08 turnover of £298m included £254m of subsidy from DRD following the deferment of the introduction of domestic charges, the remainder being metered water charges and miscellaneous revenue. The business delivered an operating profit of £64m resulting in profit after tax of £41m. This enabled payment of the £34m dividend to DRD and a retained profit of £7m for the year.

This is the first year of operation for NIW as a Government-owned Company and the first year of preparing accounts under UK GAAP. On this basis there is no relevant year on year comparator.

Following the return of devolved government, the Northern Ireland Executive decided not to impose new water and sewerage charges for 2007- 08 but to commission an independent review to address the financing of these services. In response to the Independent Water Review Panel (IWRP) report on funding the Executive agreed to introduce additional payments for water and sewerage services provided to households from April 2009, further deferring domestic billing.

The IWRP reported the last of its conclusions in January 2008. The Executive has not yet agreed the basis of a methodology by which domestic customers will make payments for water and sewerage services and Ministers are still considering the wider recommendations of the IWRP and will consult on them. This has given – and continues to give – a backdrop of uncertainty for NIW.

Despite this doubt, and a history of under-investment, NIW has delivered against the majority of its commitments for 2007-08, as set out in its Strategic Business Plan. Targets missed were response to written complaints, staff attendance, drinking water quality and pollution incidents. Measures are in place to address these issues going forward.

Key successes included delivery of £30m of operational efficiency (against the 2003-04 baseline), setting up of a Mobile Work Management System to improve the level and speed of service to customers and starting a substantial programme to transform the business.

The next few years will continue to provide significant challenge to NIW as it takes forward its ambitious transformation programme, delivering greater efficiency while improving the quality of service.

In May 2008 Katherine Bryan resigned as Chief Executive. Chris Mellor, the Chairman, is acting as Chief Executive on an interim basis. Rose Hynes resigned as a non-executive director in July 2007.