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Non-regulated revenue was marginally lower at £919 million, reflecting the impact of the slowdown in the UK property market on the group’s utility connections business. However, underlying operating profit increased by nine per cent compared with the prior year. This principally reflects the planned increase in activity on the Scottish Water contract and an increase in contribution from the company’s international operations, including the benefit of foreign exchange rate movements which amounted to £2.9 million.
Business update
United Utilities is the leading utility infrastructure outsourcing business in the UK, applying the core utility skills from its regulated activities. United Utilities holds major outsourcing contracts working on behalf of Dwr Cymru Welsh Water, Southern Water, Scottish Water, Electricity North West, Northern Gas Networks and British Gas Trading (meter installation).
United Utilities also has a meter ownership contract with British Gas Trading which provides a revenue stream to the group through rental income once the meters have been installed. In addition, United Utilities has a 15 per cent stake in Northern Gas Networks, three Scottish PFI operations and operations in Bulgaria, Estonia, Poland, the Philippines and Australia which provide a steady income stream.
In December 2008, United Utilities was selected as preferred bidder for a municipal solid waste treatment contract in Derbyshire, via a joint venture with Interserve. The contract is due to commence in April 2010 with an expected duration of 27 years. Subsequently, United Utilities also secured a 20-year desalination operations and maintenance contract in Adelaide, through its joint venture with Acciona Agua. It is expected that this contract will commence in mid-2011.
United Utilities continues to benefit from a strong order book worth over £6 billion in revenue, which provides long-term income streams for the group. Overall, the business is pleased with performance across its non-regulated contract portfolio.
United Utilities continues to seek asset-light opportunities by leveraging its core skills in areas that generate additional shareholder value with little impact on the risk profile of the group.
Other activities
As expected, other activities delivered a small underlying operating loss of £6 million during the year, as central costs were partly offset by a small contribution from United Utilities Property Solutions (UUPS). UUPS is the property sales and management business of the group and, as indicated previously, has been affected by the slowdown in the UK property market.
One-off costs of £7 million were incurred in 2008/09. These costs principally relate to the capital restructuring associated with the £1.5 billion return to shareholders.