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Utility Capital Expenditure (Industrial Report) - UK - July 2014

“The approach to infrastructure investment is in transition across the utility industry. Whereas spending in the past was mainly output-driven, future investment decisions will be more centred on innovation, asset optimisation and long-term outcomes. The rising pressure from industry regulators to reduce costs for consumers is a further challenge facing operators across the industry."

– Claudia Preedy, Industrial Analyst

This report will explore the following key questions with regard to Utility Capital Expenditure in the UK:

  • What are the key drivers for capital investment in the water and sewerage industry?
  • What are the key drivers for network investment in the electricity transmission and distribution sector?
  • What are the drivers for capital investment in the gas supply and distribution industry?
  • How will changes in the regulatory environment affect the approach to capital investment?
  • How does environmental legislation and regulations affect the utility industry?
  • What are the expenditure plans for the forthcoming regulatory control period?

This report is segmented between the following sectors:

  • Water and Sewerage
  • Electricity Transmission and Distribution
  • Gas Transmission and Distribution

The definitions of each area of expenditure tends to vary between the individual market sectors and can be broadly categorised as follows:

 

Liqueurs - UK - January 2012

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Table of contents

  1. Executive Summary

      • The market
        • Water and sewerage industry
          • Figure 1: UK capital expenditure on sewerage services, 2008/09-2012/13
        • Electricity transmission and distribution industry
          • Figure 2: Forecast network investment of the electricity distribution network operators in Great Britain, 2015/16-2022/23
          • Figure 3: Capital expenditure by the electricity transmission industry in Great Britain, 2008/09-2012/13
        • Gas transmission and distribution industry
          • Figure 4: Total gas transmission and distribution capital expenditure, 2008/09-2012/13
        • Market factors
          • Utility industry regulation
            • Legislative factors
              • Companies
                • What we think
                • Introduction

                    • Definitions
                      • Water and sewerage
                        • Electricity transmission
                          • Electricity distribution
                            • Gas distribution
                              • Gas transmission
                                • Methodology
                                  • Abbreviations
                                    • Market positioning
                                      • Customers
                                        • Suppliers
                                        • Market Factors

                                          • UK Economy

                                            • GDP
                                              • Inflation
                                                • Interest rates
                                                  • Business investment
                                                  • Water and Sewerage Industry

                                                    • Key points
                                                      • Water and sewerage industry market factors
                                                        • Industry regulation
                                                          • Legislative environment
                                                            • European Water Framework Directive (WFD)
                                                              • Urban Waste Water Treatment Directive (UWWTD)
                                                                  • Figure 5: Sewerage treatment enhancement expenditure driven by UWWTD in England and Wales, 1990-2015
                                                                  • Figure 6: Sewerage treatment enhancement expenditure driven by UWWTD in England and Wales graph, 1990-2015
                                                                • The Drinking Water Directive
                                                                  • Revised Bathing Water Directive
                                                                      • Figure 7: UK coastal bathing water compliance with Bathing Water Directive for mandatory coliform standards, 2009-13
                                                                    • Transfer of private sewers in England and Wales
                                                                      • Figure 8: Capital expenditure on private sewers in England and Wales, by water and sewerage company, 2009-13
                                                                    • The Flood and Water Management Act 2010
                                                                      • Water Bill 2013
                                                                      • Water and Sewerage Capital Expenditure

                                                                        • Key points
                                                                          • Capital expenditure
                                                                            • Figure 9: Total capital expenditure by water and sewerage companies in England and Wales, 2005-10 and 2010-15
                                                                            • Figure 10: Total capital expenditure by water-only companies in England and Wales, 2005-10 and 2010-15
                                                                            • Figure 11: Actual UK capital expenditure on water and sewerage services, 2008/09-2012/13
                                                                            • Figure 12: UK capital expenditure on water and sewerage services, 2008/09-2012/13
                                                                            • Figure 13: UK capital expenditure on water and sewerage services graph, 2008/09-2012/13
                                                                          • Process plant expenditure
                                                                            • Figure 14: UK capital and process plant expenditure by the water and sewerage industry, 2008/09-2012/13
                                                                          • Civil engineering expenditure
                                                                            • Figure 15: UK capital and civil engineering expenditure by the water and sewerage industry, 2008/09-2012/13
                                                                            • Figure 16: Civil engineering construction output for the sewerage industry in Great Britain, 2009-13
                                                                            • Figure 17: Sewers renovated and replaced in England and Wales, by company, 2008/09-2012/13
                                                                          • Building expenditure
                                                                            • Figure 18: UK capital and building expenditure by the water and sewerage industry, 2008/09-2012/13
                                                                          • Other expenditure
                                                                            • Figure 19: UK capital and other expenditure by the water and sewerage industry, 2008/09-2012/13
                                                                            • Figure 20: UK capital expenditure on water and sewerage services, by expenditure area, 2012/13
                                                                          • Water related capital expenditure in England and Wales
                                                                            • Figure 21: Analysis of water capital expenditure in England and Wales, by water and sewerage companies, by type, 2007/08-2010/11
                                                                            • Figure 22: Analysis of water capital expenditure in England and Wales, by water and sewerage companies, by type, 2011/12-2012/13
                                                                            • Figure 23: Analysis of water capital expenditure in England and Wales, by water-only companies, by type, 2007/09-2010/11
                                                                            • Figure 24: Analysis of water capital expenditure in England and Wales, by water-only companies, by type, 2011/12-2012/13
                                                                            • Figure 25: Analysis of water capital expenditure in England and Wales, by water only companies graph, by type, 2012/13
                                                                          • Scotland
                                                                            • Figure 26: Analysis of Scottish Water capital expenditure on water and sewerage services, 2006/07-2011/12
                                                                            • Figure 27: Progress of Scottish Water to Date in the Five Year Investment Programme, 2010/15
                                                                          • Northern Ireland
                                                                            • Figure 28: Analysis of Northern Ireland Water capital expenditure on water and sewerage services, 2008/09-2012/13
                                                                        • Water and Sewerage Future Capital Expenditure

                                                                          • Key points
                                                                              • Figure 29: UK Population, by region, 2013-25
                                                                            • Capital expenditure during AMP5 2010-15
                                                                              • Figure 30: Total proposed capital expenditure by water and sewerage companies in England and Wales, 2010-2015
                                                                              • Figure 31: Forecast UK capital expenditure on the water and sewerage industry, 2010/11-2014/15
                                                                              • Figure 32: Capital expenditure on water and sewerage services in England and Wales during AMP5, 2010/11-2014/15
                                                                              • Figure 33: Forecast capital expenditure for Scottish Water, 2010/2011-2014/2015
                                                                              • Figure 34: Forecast Investment Programme for Northern Ireland Water, 2010/2011-2014/2015
                                                                            • England and Wales – AMP6 2015-20
                                                                                • Figure 35: Proposed total expenditure for AMP6 in England and Wales, by water and sewerage company, 2015/16-2019/20
                                                                                • Figure 36: Proposed total expenditure on water and sewerage services in England and Wales during AMP6, 2015/16-2019/20
                                                                              • Thames Tideway Tunnel
                                                                                • Scotland Investment Programme 2015-2021
                                                                                  • Figure 37: Forecast Capital Expenditure for Scottish Water, 2015/16-2020/21
                                                                                • Northern Ireland Investment Programme 2015/16-2020/21
                                                                                • Electricity Industry

                                                                                  • Key points
                                                                                    • Electricity industry market factors
                                                                                      • Price controls
                                                                                        • Environmental and legislative factors
                                                                                        • Electricity Distribution Capital Expenditure

                                                                                          • Key points
                                                                                            • Capital expenditure
                                                                                                • Figure 38: UK gross capital expenditure by electricity distribution network operators, 2008/092012/13
                                                                                                • Figure 39: UK gross capital expenditure by the electricity distribution network operators, by company, 2008/09-2012/13
                                                                                                • Figure 40: UK gross capital expenditure by the electricity distribution network operators graph, by company, 2008/09-2012/13
                                                                                            • Electricity Distribution Future Capital Expenditure

                                                                                              • Key points
                                                                                                • Capital expenditure allowance 2010-15
                                                                                                  • New price control framework based on Revenue = Incentives+Innovation+ Outputs to come into effect from April 2015
                                                                                                      • Figure 41: Proposed total expenditure for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
                                                                                                      • Figure 42: Proposed total expenditure for RIIO-ED1 in Great Britain graph, by company, 2015/16-2022/23
                                                                                                      • Figure 43: Forecast network investment of the electricity distribution network operators in Great Britain, by company, 2015/16-2022/23
                                                                                                  • Electricity Transmission Capital Expenditure

                                                                                                    • Key points
                                                                                                      • Capital expenditure
                                                                                                          • Figure 44: Size of electricity transmission network in Great Britain, 2013
                                                                                                          • Figure 45: Allowed capital expenditure by the electricity transmission industry in Great Britain, 2007/08-2012/13
                                                                                                          • Figure 46: Capital expenditure by the electricity transmission industry in Great Britain, 2008/09-2012/13
                                                                                                          • Figure 47: Capital expenditure by the electricity transmission industry in Great Britain graph, 2008/09-2012/13
                                                                                                      • Electricity Transmission Future Capital Expenditure

                                                                                                        • Key points
                                                                                                          • New price control period RIIO-T1 2013-21
                                                                                                            • Figure 48: Allowed “baseline” capital expenditure by the electricity transmission industry in Great Britain, 2013/14-2020/21
                                                                                                            • Figure 49: “Best view” forecast for load-related capital expenditure by the electricity transmission industry in Great Britain, 2013/14-2020/21
                                                                                                            • Figure 50: “Best view” forecast for load-related capital expenditure by the electricity transmission industry in Great Britain graph, 2013/14-2020/21
                                                                                                            • Figure 51: Baseline capital expenditure allowance for NGET, 2013/14-2020/21
                                                                                                            • Figure 52: Baseline capital expenditure allowance for SHETL 2013/14-2020/21
                                                                                                            • Figure 53: Baseline capital expenditure allowance for SPTL, 2013/14-2020/21
                                                                                                          • Drivers for future capital investment
                                                                                                              • Figure 54: Renewable electricity generation capacity awaiting/under construction, as of April 2014
                                                                                                            • National Grid’s electricity 10-year statement
                                                                                                              • Future potential energy mix
                                                                                                                • Figure 55: Forecast power generation installed capacity under “slow progression” scenario, by source, 2013-35
                                                                                                                • Figure 56: Forecast power generation installed capacity under “gone green” scenario, by source, 2012-35
                                                                                                              • Increased interconnectivity between European countries
                                                                                                                • Figure 57: Existing and planned interconnectors, as of November 2013
                                                                                                            • Gas Industry

                                                                                                              • Key points
                                                                                                                • Market factors
                                                                                                                  • Social factors
                                                                                                                    • Economic factors
                                                                                                                        • Figure 58: Average wholesales gas prices, 2002-13
                                                                                                                        • Figure 59: Average wholesale gas prices graph, 2002-13
                                                                                                                      • Legislative and environmental factors
                                                                                                                      • Gas Capital Expenditure

                                                                                                                        • Key points
                                                                                                                          • The market 2009-2013
                                                                                                                            • Figure 60: Total gas transmission and distribution capital expenditure, 2008/09-2012/13
                                                                                                                            • Figure 61: Total gas transmission capital expenditure, 2008/09-12/13
                                                                                                                            • Figure 62: Total gas distribution capital expenditure, 2008/09-2012/13
                                                                                                                            • Figure 63: Total gas distribution capital expenditure graph, 2008/09-2012/13
                                                                                                                          • Replacement expenditure
                                                                                                                              • Figure 64: Length of gas mains replaced, by distribution network operator, 2009-13
                                                                                                                              • Figure 65: Length of gas mains replaced, by distribution network operator graph, 2009-13
                                                                                                                          • Gas Future Capital Expenditure

                                                                                                                            • Key points
                                                                                                                              • Forecast 2013-2021
                                                                                                                                  • Figure 66: Ofgem’s required expansion of the number of properties to alleviate fuel poverty, 2013-21
                                                                                                                                • Transmission Network
                                                                                                                                  • Figure 67: Capital expenditure boundaries for National Grid Gas considered for Ofgem’s RIIO-T1, 2014-21
                                                                                                                                  • Figure 68: Capital expenditure plans by National Grid Gas under RIIO-T1, by category, 2014-21
                                                                                                                                • Distribution Network
                                                                                                                                  • Figure 69: Controllable cost allowances for gas distribution companies under (RIIO-GD1), 2014-21
                                                                                                                              • Supply Industry Structure

                                                                                                                                • Key points
                                                                                                                                  • Companies
                                                                                                                                  • Amec

                                                                                                                                        • Figure 70: Financial analysis of AMEC, 2009-13
                                                                                                                                    • Balfour Beatty

                                                                                                                                          • Figure 71: Financial analysis of Balfour Beatty, 2009-13
                                                                                                                                          • Figure 72: Turnover analysis of Balfour Beatty, by segment, 2012-13
                                                                                                                                      • Kellogg Brown & Root Holdings

                                                                                                                                            • Figure 73: Financial analysis of Kellogg Brown & Root Holdings, 2008-12
                                                                                                                                        • The Costain Group

                                                                                                                                              • Figure 74: Financial analysis of Costain Group, 2009-13
                                                                                                                                              • Figure 75: Turnover analysis of Costain Group, by division, 2010-13
                                                                                                                                          • Laing O’rourke Utilities

                                                                                                                                              • Figure 76: Financial analysis of Laing O’Rourke, 2009-13
                                                                                                                                              • Figure 77: Financial analysis of Laing O’Rourke Utilities, 2009-13
                                                                                                                                          • Morrison Utility Services

                                                                                                                                                • Figure 78: Financial analysis of Morrison Utility Services, 2009-13
                                                                                                                                            • Mcnicholas Construction Holdings

                                                                                                                                                • Figure 79: Financial analysis of McNicholas Construction (Holdings), 2009-13
                                                                                                                                            • Forefront Utilities

                                                                                                                                                • Figure 80: Financial analysis of Forefront Utilities, 2009-13
                                                                                                                                            • Further Sources and Contacts

                                                                                                                                              • Trade associations and regulatory bodies
                                                                                                                                                • Trade magazines
                                                                                                                                                  • Trade exhibitions

                                                                                                                                                  Companies Covered

                                                                                                                                                  To learn more about the companies covered in this report please contact us.

                                                                                                                                                  Utility Capital Expenditure (Industrial Report) - UK - July 2014

                                                                                                                                                  US $1,333.00 (Excl.Tax)