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UK Utility Capital Expenditure market report

Key points included

  • Market forecasts across all sectors
  • What drives capital investment in supply and distribution
  • Market factors and drivers across social,economic,environmental and legislation

Market segmentation

This report is segmented between the following sectors:

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

Company Profiles

  • Balfour Beatty
  • The Costain Group
  • J Murphy & Sons
  • Kier Group
  • Laing O’Rourke
  • Morrison Utility Services

Expert analysis from a specialist in the field

Written by Claudia Preedy, a leading analyst in the B2B sector, her extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

Network operators are facing tougher price controls and performance targets in the upcoming spending periods. They will also be under increased pressure to deliver innovation, reliability and investment at the lowest cost to consumers. These increased cost and efficiency pressures are passed onto the supply chain. Collaboration, technology and innovation will play a key role in enabling utilities and their supply chain to deliver future capital projects in the most efficient way Claudia Preedy
B2B Analyst

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What's included

What's included

Table of contents

Table of contents

  1. Overview

    • What you need to know
      • Covered in this Report
        • Water & Sewerage
          • Electricity Transmission
            • Electricity Distribution
              • Gas Distribution
                • Gas Transmission
                • Executive Summary

                    • Capital expenditure in water and sewerage sector
                      • Gross capital expenditure in water and sewerage industry up by 8% in 2018/19
                        • Figure 1: UK capital expenditure on water and sewerage services, 2015/16-2018/19
                      • English water companies plan to spend a record £50 billion+ in AMP7 (2020-25)
                        • Capital expenditure in electricity transmission and distribution sector
                          • Capital investment in distribution networks expected to be lower in current price control
                            • Figure 2: UK gross capital expenditure by electricity distribution network operators, 2013/14-2018/19
                          • Rise in distributed generation requires more active management of distribution network
                            • Capital expenditure in gas transmission and distribution sector
                              • Capital spending picks up as current price control period progresses
                                • Figure 3: Total gas transmission and distribution capital expenditure, 2014/15-2018/19
                              • Companies and brands
                                • Utility operators are adopting a more collaborative approach and closer relationships with the supply chain
                                  • What we think
                                  • Issues and Insights

                                    • AMP7 (2020-25) set to be the toughest price review faced by water and sewerage companies yet
                                      • The facts
                                        • The implications
                                          • Enabling low-carbon energy transition will be a key focus for electricity network operators in the next price control
                                            • The facts
                                              • The implications
                                              • Water and Sewerage Sector – What You Need to Know

                                                • Gross capital expenditure in water and sewerage industry up by 8% in 2018/19
                                                  • Move towards long-term alliances and frameworks across industry
                                                    • English water companies plan to spend a record £50 billion+ in AMP7 (2020-25)
                                                    • Water and Sewerage Industry Capital Expenditure

                                                      • Move towards totex in AMP6 and beyond set to reduce bias towards capital spending
                                                        • Move towards long-term alliances and frameworks across industry
                                                          • Total capital expenditure
                                                              • Figure 4: UK capital expenditure on water and sewerage services, 2015/16-2018/19
                                                            • Sewerage-related capital expenditure
                                                              • Figure 5: Analysis of sewerage-related capital expenditure, by water and sewerage companies in England and Wales, 2015/16-2018/19
                                                              • Figure 6: Analysis of sewerage capital expenditure in England and Wales by water and sewerage companies, by type, 2015/16-2018/19
                                                            • Water-related capital expenditure
                                                              • Figure 7: Analysis of water-related capital expenditure in England and Wales, by water and sewerage companies, 2015/16-2018/19
                                                              • Figure 8: Analysis of water capital expenditure in England and Wales by water and sewerage companies, by type, 2015/16-2018/19
                                                              • Figure 9: Analysis of water capital expenditure in England and Wales by water-only companies, by type, 2015/16-2018/19
                                                            • Scottish Water capital expenditure
                                                              • Figure 10: Analysis of Scottish Water capital expenditure on water and sewerage services, 2014/15-2018/19
                                                            • Northern Ireland capital expenditure
                                                                • Figure 11: Analysis of Northern Ireland Water capital expenditure on water and sewerage services, 2014/15-2018/19
                                                            • Water and Sewerage Future Capital Investment

                                                              • Future challenges facing the water and sewerage sector
                                                                  • Figure 12: UK population, by region, 2014-36
                                                                • Thames Tideway Tunnel
                                                                    • Figure 13: Estimated cost of Thames Tideway Tunnel, 2015/16-2021/22+
                                                                  • AMP7 (2020-25) set to be toughest price review yet
                                                                    • English water companies plan to spend a record £50 billion+ in AMP7 (2020-25)
                                                                      • Opening up of non-household retail market in England to provide new opportunities for water and sewerage companies
                                                                      • Water and Sewerage Industry Legislative and Regulatory Environment

                                                                        • Industry regulation
                                                                          • Legislative environment
                                                                            • European Water Framework Directive
                                                                              • Urban Waste Water Treatment Directive
                                                                                • The Drinking Water Directive
                                                                                  • Revised Bathing Water Directive
                                                                                    • Implications of Brexit on the UK water and sewerage sector
                                                                                      • Transfer of private sewers in England and Wales
                                                                                        • The Flood and Water Management Act 2010
                                                                                          • Water and sewerage retail competition opens up for all business customers in England in April 2017
                                                                                          • Electricity Distribution and Transmission – What You Need to Know

                                                                                            • Capital expenditure by DNOs expected to be lower in current price control period
                                                                                              • Rise in distributed generation requires more active management of distribution network
                                                                                                • Change in energy mix is a key driver for investment in transmission network
                                                                                                • Electricity Distribution Capital Expenditure

                                                                                                  • Introduction
                                                                                                    • RIIO model adopted for current price control period (2015-23)
                                                                                                        • Figure 14: Total expenditure versus allowance, by DNO, 2015/16-2017/18
                                                                                                        • Figure 15: Total expenditure by electricity distribution network operators in Great Britain, by type, 2015/16-2017/18 cumulative total
                                                                                                      • Capital expenditure expected to be lower in current price control
                                                                                                        • Figure 16: UK gross capital expenditure by electricity distribution network operators, 2013/14-2018/19
                                                                                                        • Figure 17: UK gross capital expenditure by electricity distribution network operators, 2013/14-2018/19
                                                                                                        • Figure 18: UK gross capital expenditure by the electricity distribution network operators, by company, 2014/15-2018/19
                                                                                                    • Electricity Distribution Future Capital Expenditure

                                                                                                      • Forecast total expenditure in RIIO-ED1 (2015-23)
                                                                                                          • Figure 19: Actual total expenditure, totex allowance and forecasts for RIIO-ED1, by company, 2015/16-2017/18
                                                                                                          • Figure 20: Total expenditure forecast for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
                                                                                                        • Impact of decarbonisation, decentralisation and digitisation on distribution networks set to be key focus in next price control period RIIO-ED2
                                                                                                        • Electricity Transmission Capital Expenditure

                                                                                                          • Overview
                                                                                                              • Figure 21: Size of electricity transmission network in great Britain, 2019
                                                                                                              • Figure 22: Capital expenditure by the electricity transmission industry in Great Britain, 2014/15-2018/19
                                                                                                              • Figure 23: Capital expenditure by the electricity transmission industry in Great Britain, 2014/15-2018/19
                                                                                                          • Electricity Transmission Future Capital Expenditure

                                                                                                            • Price Control Period RIIO-T1 2013-21
                                                                                                                • Figure 24: NGET annual capital expenditure, 2014-21
                                                                                                                • Figure 25: SHET annual capital expenditure, 2014-21
                                                                                                                • Figure 26: SPTL annual capital expenditure, 2014-21
                                                                                                              • Enabling low-carbon energy transition will remain key focus in next price control (RIIO-T2 2021-26)
                                                                                                              • Drivers for Investment in Electricity Distribution and Transmission Infrastructure

                                                                                                                • Decarbonisation of UK energy system
                                                                                                                  • Government ambition to achieve net-zero emissions by 2050 will push up electricity demand
                                                                                                                    • Change in energy mix is a key driver for investment in transmission network
                                                                                                                      • Smart grid development to support low-carbon economy and aid transition to a more flexible energy system
                                                                                                                        • Ofgem-supported innovation schemes to drive smart grid market and transition to low-carbon economy
                                                                                                                          • Rise in distributed generation requires more active management of distribution network
                                                                                                                              • Figure 27: Distributed generation connected to the distribution network, 2012-17
                                                                                                                              • Figure 28: Distributed generation connected to the distribution network, 2016/17 (MW)
                                                                                                                            • Renewables capacity development pipeline
                                                                                                                              • Figure 29: Renewable energy projects in pipeline, by technology, as of September 2019
                                                                                                                            • Growth in decentralised and renewable electricity generation will increase the complexity of operating a secure and cost-effective energy system
                                                                                                                              • Energy storage to play key role in transition to clean electricity supply system
                                                                                                                                • Electrification of transport creates new opportunities
                                                                                                                                  • Despite Brexit uncertainty, interconnector capacity between Britain and Europe is set to increase
                                                                                                                                      • Figure 30: Existing and planned interconnectors, as of November 2019
                                                                                                                                  • Gas Distribution and Transmission – What You Need to Know

                                                                                                                                    • Capital spending picks up as current price control period progresses
                                                                                                                                      • Gas network operators to face tougher price controls from 2021
                                                                                                                                      • Gas Capital Expenditure

                                                                                                                                        • RIIO model adopted for current price control period
                                                                                                                                          • Innovation at centre of new price control model for gas distribution and transmission network
                                                                                                                                            • Capital spending picks up as current price control period progresses
                                                                                                                                              • Figure 31: Total gas transmission and distribution capital expenditure, 2014/15-2018/19
                                                                                                                                              • Figure 32: Total gas transmission capital expenditure, 2014/15-2018/19
                                                                                                                                              • Figure 33: Total gas distribution capital expenditure, 2014/15-2018/19
                                                                                                                                              • Figure 34: Total gas transmission and distribution capital expenditure, 2014/15-2018/19
                                                                                                                                            • Replacement expenditure dominated by iron mains replacement programmes
                                                                                                                                                • Figure 35: Length of iron gas mains replaced, by distribution network operator, 2013-18
                                                                                                                                            • Gas Future Capital Expenditure

                                                                                                                                              • Network operators to face tougher price controls from 2021
                                                                                                                                                • Transmission network capital expenditure
                                                                                                                                                  • Figure 36: Annual capital expenditure plans by National Grid Gas Under RIIO-T1, by category, 2013/14-2020/21
                                                                                                                                                • Distribution network capital expenditure
                                                                                                                                                  • Figure 37: Annual capex plans under RIIO-GD1, by GDN, 2013/14-2020/21
                                                                                                                                                  • Figure 38: Annual Repex plans under RIIO-GD1, by GDN, 2013/14-2020/21
                                                                                                                                                  • Figure 39: Forecast total capex and repex during RIIO-GD1, 2013/14-2020/21
                                                                                                                                              • Gas Industry Market Factors and Drivers

                                                                                                                                                • Social Factors
                                                                                                                                                  • Economic Factors
                                                                                                                                                    • The UK’s increased reliance on gas imports
                                                                                                                                                      • Government suspends shale gas fracking indefinitely
                                                                                                                                                        • Wholesale gas prices
                                                                                                                                                          • Figure 40: Average wholesale gas prices, 2009-19
                                                                                                                                                        • Environmental and legislative factors
                                                                                                                                                          • UK Energy Policy
                                                                                                                                                            • Government commitment to reduce carbon emissions
                                                                                                                                                              • UK makes good progress in reducing CO2 emissions to date, but on track to miss targets between 2023 and 2032
                                                                                                                                                                • Policies to decarbonise electricity
                                                                                                                                                                  • Renewables Obligation
                                                                                                                                                                    • Feed-in Tariffs
                                                                                                                                                                      • Carbon Price Floor
                                                                                                                                                                        • Contracts for Difference
                                                                                                                                                                          • Capacity Market
                                                                                                                                                                            • The Renewable Heat Incentive
                                                                                                                                                                            • Companies and Brands – What You Need to Know

                                                                                                                                                                              • Balfour Beatty now clearly focused on specific markets with inherent growth and where the group has the right expertise
                                                                                                                                                                                • Costain launches “leading edge” strategy to accelerate transition away from complex construction programmes to higher-margin services
                                                                                                                                                                                  • Kier’s strategic review identifies need to simplify the portfolio of businesses
                                                                                                                                                                                  • Industry Structure

                                                                                                                                                                                    • Company Profiles

                                                                                                                                                                                      • Balfour Beatty
                                                                                                                                                                                        • Build to Last transformation programme launched in 2015
                                                                                                                                                                                          • Balfour Beatty expects the UK water sector to offer significant opportunities in the medium term
                                                                                                                                                                                            • Financial performance
                                                                                                                                                                                              • Figure 41: Financial analysis of Balfour Beatty, 2014-18
                                                                                                                                                                                              • Figure 42: Turnover analysis of Balfour Beatty, by segment, 2016-18
                                                                                                                                                                                            • Costain Group
                                                                                                                                                                                              • “Leading Edge” Strategy
                                                                                                                                                                                                • Financial performance
                                                                                                                                                                                                  • Figure 43: Financial analysis of Costain Group, 2014-18
                                                                                                                                                                                                  • Figure 44: Turnover analysis of Costain Group, by segment, 2014-18
                                                                                                                                                                                                • J Murphy & Sons
                                                                                                                                                                                                  • Group strategy
                                                                                                                                                                                                    • Financial performance
                                                                                                                                                                                                      • Figure 45: Financial analysis of J Murphy & Sons, 2014-18
                                                                                                                                                                                                    • Kier Group
                                                                                                                                                                                                      • Strategic Review 2019
                                                                                                                                                                                                        • Kier acquires McNicholas Construction (Holdings)
                                                                                                                                                                                                          • Financial performance and outlook
                                                                                                                                                                                                            • Figure 46: Financial analysis of Kier Group, 2015-19
                                                                                                                                                                                                          • Laing O’Rourke
                                                                                                                                                                                                            • Following a Strategic Review in 2015/16 Laing O’Rourke has established a more focused business structure
                                                                                                                                                                                                              • Company performance and outlook
                                                                                                                                                                                                                • Figure 47: Financial analysis of Laing O’Rourke, 2015-19
                                                                                                                                                                                                              • Morrison Utility Services
                                                                                                                                                                                                                • Company performance
                                                                                                                                                                                                                  • Figure 48: Financial analysis of Morrison Utility Services, 2015-19
                                                                                                                                                                                                              • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                                                  • Abbreviations
                                                                                                                                                                                                                    • Methodology
                                                                                                                                                                                                                    • Further Sources and Contacts

                                                                                                                                                                                                                      • Trade associations and regulatory bodies
                                                                                                                                                                                                                        • Energy UK
                                                                                                                                                                                                                          • Energy Networks Association
                                                                                                                                                                                                                            • Energy Industries Council
                                                                                                                                                                                                                              • Office of Gas and Electricity Markets (Ofgem)
                                                                                                                                                                                                                                • Office of Gas and Electricity Markets – Scotland (Ofgem Scotland)
                                                                                                                                                                                                                                  • Office of Gas and Electricity Markets – Wales (Ofgem Wales)
                                                                                                                                                                                                                                    • Association of Consulting Engineers
                                                                                                                                                                                                                                      • British Water
                                                                                                                                                                                                                                        • Chartered Institution of Water & Environmental Management
                                                                                                                                                                                                                                          • International Water Association
                                                                                                                                                                                                                                            • Ofwat
                                                                                                                                                                                                                                              • Street Works UK
                                                                                                                                                                                                                                                • Trade magazines
                                                                                                                                                                                                                                                  • The Engineer
                                                                                                                                                                                                                                                    • European Process Engineer
                                                                                                                                                                                                                                                      • Plant and Works Engineering
                                                                                                                                                                                                                                                        • Utility Week
                                                                                                                                                                                                                                                          • Trade events
                                                                                                                                                                                                                                                            • edie live 2020
                                                                                                                                                                                                                                                              • Utility Week Live 2020

                                                                                                                                                                                                                                                              About the report

                                                                                                                                                                                                                                                              This report will give you a complete 360-degree view of your market. Not only is it rooted in robust proprietary and high-quality third-party data, but our industry experts put that data into context and you’ll quickly understand:

                                                                                                                                                                                                                                                              • The Consumer

                                                                                                                                                                                                                                                                What They Want. Why They Want It.

                                                                                                                                                                                                                                                              • The Competitors

                                                                                                                                                                                                                                                                Who’s Winning. How To Stay Ahead.

                                                                                                                                                                                                                                                              • The Market

                                                                                                                                                                                                                                                                Size, Segments, Shares And Forecasts: How It All Adds Up.

                                                                                                                                                                                                                                                              • The Innovations

                                                                                                                                                                                                                                                                New Ideas. New Products. New Potential.

                                                                                                                                                                                                                                                              • The Opportunities

                                                                                                                                                                                                                                                                Where The White Space Is. How To Make It Yours.

                                                                                                                                                                                                                                                              • The Trends

                                                                                                                                                                                                                                                                What’s Shaping Demand – Today And Tomorrow.

                                                                                                                                                                                                                                                              Please Note: This is a sample report. All of the figures, graphs, and tables have been redacted.

                                                                                                                                                                                                                                                              Description