AMP6: A watershed moment

AMP6 kicked off in March this year, with the utility companies moving into the sixth phase of asset management following a long period of tendering and negotiations.

This phase of investment has seen the shift in focus from short term investment, replacing the ageing structures and systems to improve efficiency, to a ‘totex’ – or total expenditure investment – looking to improve and upgrade the systems for future benefits and in the long term.

The realignment was set out in an Ofwat report, published in 2013, which showed the methodology Ofwat would use to assess water companies’ business plans for AMP6.

The methodology relates to water supply and sewerage in England and Wales and made it clear that the water industry’s emphasis is shifting from the ‘ticking regulatory boxes’ approach of previous AMPs to focusing on value for money for customers.

For the first four AMP periods, water companies’ business plans were dominated by the need to meet tough European Union legislation covering issues like wastewater quality and wildlife habitats.

This period will see water companies trying to get the most out of their existing assets and finding ways to minimise cost of operation.

The Ofwat document made it clear that water companies should be focusing on what it called ‘long-term outcomes’, which it hopes will encourage innovative ways of working that will deliver services for less money, and with less impact on the environment.

As a result, the regulator expects to see substantial efficiency savings being delivered during the five year AMP6 period.

At the same time, Ofwat wants to encourage companies to manage water supplies more sustainably. It believes this will happen because the companies will no longer have a bias toward capital intensive and resource intensive solutions, and because it is introducing incentives to encourage the water companies to trade water and to source it form areas that do not damage the natural environment.

This shift in emphasis is leading to water companies looking for different skill sets from their supply chains – expertise that will help make more of existing assets.

The focus on long-term thinking is also being reflected in the way some water companies are looking to procure the firms that will deliver work during AMP6, with many opting for alliances, or for frameworks that run beyond the traditional five-year AMP period.

Ofwat gave final approval to a £44Bn spend by water firms over the next period at the end of last year, saying that the deals struck with the water companies will lead to 5% average fall in bills across England and Wales.

Jonson Cox, Ofwat Chairman, said: “This is an important step in maintaining customers’ trust and confidence in the water sector.

“We set out to deliver a challenging but fair outcome. We are requiring companies to meet higher service standards and deliver on their promises to customers.

“We are bringing down bills so customers can expect value for money, while investors can earn a fair return. Companies will need to stretch themselves to deliver much more with the same level of funding as in previous years. We will achieve more resilient infrastructure and better service as a result.”

Alongside the asset investment and upgrade, major projects set to take place include Severn Trent Water’s Birmingham Resilience project, Wessex Water’s integrated supply grid, and modernisation of United Utilities’ Davyhulme wastewater treatment works, with the Thames Tideway Tunnel to be financed and delivered by an independent provider.

Northumbrian Water names AMP6 winning bidders

Northumbrian Water recently named the four winning contractors to deliver the AMP6 framework.

An Esh Construction and MWH Joint Venture, Integrated Water Services, Interserve and Mott MacDonald Bentley will carry out planned maintenance work on Northumbrian Water’s network over the ten-year contract.

Works on the AMP6 contract range from short term flood damage mitigation to long-term, large-scale capital projects designed to improve overall asset infrastructure.

John McGovern, Northumbrian Water Group’s Head of Asset Delivery, said: “These partnership agreements clearly demonstrate our commitment to providing our customers, who rely on us every day, with an excellent service and to protecting the environment. The contracts will boost the economy of our region and of the local communities we serve and will also support employment.

”We are working closely with all companies involved to ensure the smooth transition of contracts and we look forward to working with those appointed. Having long-term framework agreements in place will enable better planning, relationship building and the transfer of in-depth knowledge and skills. As a result of the security that this work brings, those who have won contracts will also be able to further invest in their own businesses, people and systems.”

Stephen Wilkie, Regional Managing Director of Esh Construction, based in County Durham, said: “We are proud and delighted to have been awarded this contract together with our colleagues at MWH, especially as our working partnership goes back for more than ten years.

”This contract extends our working relationship with Northumbrian Water with whom we have worked for over 20 years and is in addition to another contract – delivering reactive wastewater maintenance services – which we won earlier this year.”

Cath Schefer, Managing Director of MWH UK said: “We’re delighted with our appointment to this framework contract with our partners Esh. It is a great opportunity to bring our complementary capabilities to meet the challenges of AMP6 and the Totex environment. We look forward to working collaboratively with the other framework partners to drive efficiencies and ‘best in class’ customer service.”

Northumbrian Water Group supplies 2.7 million people with water and waste water services in the North East and 1.8 million people with water services in Essex and Suffolk.

Yorkshire Water Services appoints £100M contract partner

Yorkshire Water Services has appointed Nomenca Limited, part of the NM Group, a £100M contract in the delivery of their £3.8Bn AMP6 investment programme.

Carrying out the repair, restoration, maintenance and improvement works to Yorkshire Water Service’s existing assets, as well as some customer support responsibilities.

Mark Fryer, General Manager for Nomenca Leeds commented: “this is a key contract win for Nomenca. I am thrilled, excited and looking forward to being involved with working collaboratively with Yorkshire Water to deliver savings through their Direct Delivery Model.”

Paul Robins, asset solutions manager at Yorkshire Water, said: “Following a 12 month selection period, we are pleased to announce that Nomenca is one of four contract partners we will be working with to deliver this new MEICA capital framework. The MEICA framework will provide a fast and efficient delivery route where capital work can go straight into delivery. A key element of the new framework will involve the contract partners bringing the private to public pumping stations up to company standards.”

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