Discover how two different water management companies, Welsh Water in Wales and Gaia Spa in Tuscany, have returned value to their users while maintaining sustainable debt in their investment and upgrade of infrastructure through bonds and project financing.
Welsh Water (Glas Cymru) is the company that manages the water service in Wales, has a turnover of approximately 810 million pounds and serves more than 3.1 million inhabitants. It was born in 2000, inheriting the management from a previously listed company. The particularity of Welsh Water, compared to all the other companies that manage the water service in Great Britain, is that it is a non-profit company, or as they say: a company without shareholders. Welsh Water is a large company that has invested more than 334 million in the last year for a value of about 107 pounds per inhabitant. Gaia is a joint-stock company that manages the water service in northern Tuscany, has a turnover of around 90 million and serves around 420,000 inhabitants. The company was established in 2004 and was entrusted with the water service in 2005. In Tuscany, it is the only wholly public company owned by the municipalities. Gaia is considered a medium-sized company on the national scene. This year (2022), it made around 35 million investments for a value of around 84 euros per inhabitant.
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From these brief descriptions, it does not seem that there is much in common except the fact that they are two industrial companies that manage integrated water services in different countries and areas. Yet, they have something in common. Both allocate a part of the value produced (the profit) to reimburse users.
Welsh Water has been returning value to the user since its inception (2000). Between 2000 and 2022, the company returned more than £450 million to users, which corresponds to £145 per inhabitant, or £7 per inhabitant per year. Gaia began to return value to the user in 2011. In these eleven years, the company has returned to the user a value of 12.5 million euros, which corresponds to 30 euros per inhabitant, or almost 3 euros per inhabitant per year.
Il valore restituito agli utenti
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Welsh Water began to return value to users through a refund, which took place when the balance sheet profit was determined to each user in proportion to their annual consumption. Subsequently, it combined this type of reimbursement with a transfer to support the weakest users who were having difficulty paying their bills. Finally, it has added a third form of reimbursement using the profit to finance investments so as not to have them charged to the user’s fee. Instead, Gaia initiated this form of restitution of value through the establishment of a fund to finance the weakest users who were having difficulty paying their bills. In the last two years, similarly to what Welsh Water has done, it has combined this form of support with the use of part of the profit to finance investments whose costs will not be charged to the user.
The result of this return of value to the users translates into a proportional reduction in the tariff and, therefore, in the expense that the user incurs for his own water consumption.
But is it possible to give up the profit and be able to finance the volume of investments necessary to upgrade and maintain infrastructure efficiency? More simply, is it possible to finance investments only with debt? Both companies are doing it. Welsh Water through the issue of bonds and Gaia through a project financing type loan. They can do it because their management makes their debt sustainable. For Welsh Water, the sustainability of its debt is certified by the rating agencies, which classify it as the company with the best creditworthiness in the whole of the United Kingdom.
A seminar was held in Florence in recent days in which these two experiences were discussed and explored, highlighting how this choice of giving up the profit to restore value to the user can be sustainable and a viable alternative in the management of the water service to the figure of the joint-stock company which distributes dividends to its shareholders.
PETER PERRY, Chief Executive di Welsh Water e VINCENZO COLLE, Presidente di Gaia SpA