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Bringing water to life

Supporting the lives of people and the places they love for generations to come

Annual Report and Accounts 2022

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Pennon is one of the leading businesses in the UK water sector.

We provide clean water and wastewater services. We believe the role of responsible business is one of stewardship for sustainable living, supporting communities, customers and the environment to thrive, now and into the future.


Our purpose and strategy brought to life...

View our vision and purpose

    Financial highlights

    £792.3m

    Group revenue

    (2020/21: £624.1m)

    £143.5m

    Group underlying PBT

    (2020/21: £157.0m)

    4.9p

    Basic (statutory) EPS

    (2020/21: 418.5p)

    £127.7m

    Group PBT

    (2020/21: £132.1m)

    38.53p

    Dividend per share

    (2020/21: 35.61p)

    50.2p

    Adjusted earnings per share

    (+5.0%)

    Our leadership statements

    View our leadership team
    Gill Rider Chair

    We have prioritised listening to our wider stakeholders, so we can set the right priorities for the business, confident we can meet the needs of our customers and communities.

    Susan Davy Chief Executive Officer

    We're building real momentum, executing our strategy and driving sustainable growth. We're doing more for customers today than ever before, and going further faster, in delivering the step change demanded for the environment.

    Paul Boote Group Finance Director

    Financial performance across the Group has been robust with a strong contribution from the newly acquired Bristol Water.

    Protecting the places we love

    View our sustainability section

    In the last few years, we have seen increased focus on the need to improve river and sea quality. The popularity of water-based activities, such as wild swimming and paddle boarding has increased, and through the pandemic we saw greater appreciation for our green and blue spaces.

    Alongside this, since we submitted our last business plan, there has been a broader policy shift with the Government's 25-year Environment Plan, COP26, the race to Net Zero, and the new Environment Act 2021.

    Environment

    Our purpose is to protect and enhance the environment for generations to come, therefore as a business so closely associated with the environment, we are very aware of our environmental impact and obligations.

    2021/22 Environmental highlights
    Net Zero

    Published our Net Zero and Climate Change Adaptation plans.

    Biodiversity

    Enhanced biodiversity through exceeding habitat restoration and tree planting targets.

    Smart water butts

    Trialled Smart Water Butts to reduce storm response and impacts of bad weather.

    WaterFit

    In addition to significant progress targeting reduced pollution events, we published new environmental water quality commitments and targets through our groundbreaking WaterFit programme.

    Mitigating the impact of climate change

    In December 2021, we published our climate change adaptation report. We have invested to ensure that we have the tools and data to understand the impact of climate change on our operations and services and have assessed over 60 climate related risks that could affect the services and the environment we rely on, each of which has been assessed using our Corporate Risk Framework. Assessing climate change risks, and the potential impacts, and possible mitigations on our various operations, assets and networks, is an ongoing and iterative process.

    Key headline risks and themes

    The key headline risks and themes, which reflect the most significant risks, and how we will address these are:

    • Risks to the natural environment and biodiversity
    • Risks to public water supply from drought and low river levels
    • Risks of poor water quality
    • Risks of household water supply interruptions
    • Risks of coastal flooding and erosion
    • Risks from river or groundwater flooding
    • Failures of other infrastructure networks
    • Risk of sewer flooding from heavy rainfall

    Protecting river and seas through WaterFit

    WaterFit has been developed, building on existing plans to ensure we can deliver this - across a wider range of commitments, as well as going faster and further with a new ambition. By front-loading and rebalancing £330m investment, we will focus on those projects that will deliver multiple benefits, focused on a catchment by catchment, community by community investment approach, ensuring all areas in our region are benefiting with no additional impact on bills.

    Our WaterFit commitments
    • Nurturing healthy rivers and seas
    • Putting nature on everyone's doorstep
    • Creating and restoring habitats
    • Inspiring our local champions
    • Creating a sustainable future
    • Putting people in control
    Read more about our WaterFit commitments

    Pioneering for success - bringing water to life through innovation

    With the expectations of our customers and stakeholders increasing, the impact of climate change, uncertainty in world economic markets and the importance of the environmental agenda, the need for us to innovate is critical.

    Our innovation strategy

    Our innovation strategy is mapped to our core values to guide not just how, but ultimately for what purpose and towards what aims we innovate. These core values form the pillars of our innovation strategy.

    • Collaborative research: Partnerships and mutuality in our research for the benefit of our customers, employees, society, and the environment.
    • Progressive solution development & technology scouting: Leveraging new technologies, data, diversity, and new ways of working.
    • Responsible ideation and problem definition: Being led by sustainability, environmental, social, and economic purpose.
    • Trusted partnering: Transparency, robust governance, and accountability in all that we do.

    Net Zero: Our promise to the planet

    View our environmental section

    The world is facing a climate emergency. We need to act now to protect our planet. In 2021, we set our ambitious plans to reduce our operational carbon emissions and hit our Net Zero target by 2030. Since then we have gone further, adding a Race to Zero commitment to reduce greenhouse gas emissions (GHG) reduction across our entire value chain by 2045.

    As a Group, we have also committed to setting both near and long-term Science Based Targets (SBT) in accordance with the Science Based Targets Initiative (SBTi) criteria and Corporate Net Zero Standard.

    Our Net Zero strategy is driven by three pillars:

    Sustainable living

    Reducing emissions through operational practices, including our on-site water usage, increasing energy efficiency and using lower carbon fuel sources.

    We use standalone power generators at our operational sites as back up so that we can provide an uninterrupted continual service in the event of a power cut. The majority of these generators run on diesel. As part of our Net Zero fuel switching strategy, we have undertaken a trial of the use of Hydrotreated Vegetable Oil (HVO) biofuel, as a diesel substitute. The trial demonstrated operation using HVO reduced GHG emissions as well as reducing air quality emissions (NOx, CO), when compared to diesel. Importantly the trial demonstrated no adverse impact to the generator's operation. As a result of the successful trial, we are exploring roll out of HVO to all our wastewater sites.

    Championing renewables

    Investment is underway to support the achievement of 50% renewable energy generation at our sites by 2030.

    Achieving our Net Zero plan will a require significant expansion of renewable energy across our sites. This will include both tried and tested technology which we already use, for example, Solar PV and Hydropower but will also require new and innovative solutions. Our first year of championing renewables has focused on both. We've approved investment in a large expansion of our solar schemes with an additional 4MW to be deployed during 2022. The projects are a mixture of rooftop and ground mount schemes across our sites including a 440kW array at Lords Meadow wastewater treatment works in Crediton. We are also investigating the potential role of hydrogen, geothermal energy and floating solar in our future energy mix. Where we cannot generate enough to meet all our needs ourselves, 100% of the electricity we purchase will be from renewable sources.

    Reversing carbon emissions

    Working in partnership to deliver natural carbon sequestration through peatland restoration and tree planting. We restored around 500 hectares of peatland in K7, and we are now targeting planting 250,000 trees by 2025 after having achieved our initial five-year plan of 100,000 trees in 2021.

    Park Pit - a new woodland for biodiversity and carbon sequestration benefit

    In March 2022, a group of colleagues from across Estates, Commercial, Property, Drinking Water, Asset Management, Communications and Natural Resources teams went out to Park Lake on Bodmin Moor in Cornwall, on a mission to plant 335 trees.

    Professional arborculturalist, Steve Evans from Tree Investment, gave a lesson on how to successfully plant the trees to encourage growth and diversity. The gorgeous location, a field very close to Colliford Lake, is now the home to Oaks, Hawthorns, Willows and Birch trees and is one of many tree planting initiatives we have planned.

    Supporting the lives of people

    Our purpose is to support our people and communities to increase our social value. As a business with c.3.5 million customers and c.3,000 employees we go to great lengths to protect one of our most precious resources.

    Talented people delivering for colleagues, customers and communities

    At Pennon, we believe our people are our most valuable asset. We are proud of the values we live by in all that we do.

    This means that we are focused on doing everything we can to recruit, train, develop and support all of our employees, whatever their background, experience or outlook, unlocking their potential now and for the longer term.

    Leadership development at Bristol Water

    This year saw Bristol Water launch its first future leaders programme - LEAD Aspire. The course, run over four days, gives budding managers an insight into what is required to be a successful modern day leader whilst equipping them with some of the tools required to make a success of it. Topics range from general management and leadership techniques, how to adopt a growth mindset, assessing your own strengths through self-reflection and how to be an inclusive leader to name a few.

    Customers

    We believe there's no better way to respond to or capture public sentiment than building a deeper relationship with customers - really engaging with them and putting them at the heart of our decision-making.

    Building a deeper relationship with customers

    As part of our New Deal Business Plan, we launched our innovative and pioneering WaterShare+ scheme, sharing £20 million of outperformance with customers and giving them not only a say in what we do but a stake too.

    Shaped by customers for customers, its origins were in the largest ever customer consultation we have undertaken. One in 16 households in the South West Water region are now shareholders as well as customers, heralding a new era in customer ownership - a true partnership.

    Sharing our success with customers is at the heart of WaterShare+ and put simply, if we deliver, customers also benefit. With the announcement of the Bristol Water acquisition, our intention is to include Bristol Water customers in the second run of our pioneering WaterShare+ scheme (subject to Shareholders approval at the 2022 Pennon AGM), sharing the benefits of common ownership with Pennon.

    Communities

    There are many amazing community projects which make a real difference to the lives of our region's people and the places they love. That is why we are tapping into the social consciousness of our customers in new ways through the industry's first Water-Saving Community Fund, empowering customers to champion and drive initiatives to save water locally, as well as our Neighbourhood Fund which is supporting communities with much needed help.

    Tapping into the amazing world of water

    Having opened the doors to our educational visitor centre at Roadford Lake last year, this year South West Water launched a new educational programme to help us inspire future generations to be environmental champions right across the South West. Since the relaunch of our programme in primary schools in January 2022, 70% of children went away from these lessons saying they had learnt something new.

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