Guernsey Water 2016 Annual Report FIRM FINANCIAL FOUNDATIONS water.gg/ annualreport2016 19 to develop an energy audit process for our operational sites in 2017 to try to identify further cost savings. Capital Investment Vehicles & Lorries A vehicle strategy was implemented that has led to a reduction in servicing and fuel costs. We have also replaced our network survey unit so that we are well equipped to survey and understand the condition of our network of pipes, helping to ensure that maintenance of this network is focused on those areas that need it the most. Investment in a new lorry was brought forward due to the escalating cost of maintaining the current one which is reaching the end of its life. IT New tablets have been given to our field-based staff and provide invaluable access to asset records and our telemetry system so they can see how those assets are performing in real time. Business Performance Efficiency 7 Tight control of our operating expenditure offset lower than expected operating income last year. At the start of 2016 we targeted £300k of efficiencies and savings against our budget, we delivered £306k. This improved our performance to just below 30% and exceeded our 27.5% target. Further efficiency savings are planned for 2017 when we will also be carrying out a benchmarking assessment to determine a longer term efficiency target based on comparison with other water companies, including those in other island jurisdictions. Funding Our Capital Programme 8 Funding the Belle Greve sea outfalls and a decision to shorten the asset life of Longue Hougue water treatment works had a significant impact on this key performance indicator. Our operating surplus as a percentage of revenue was 4.5% against a target of 3%. Business Initiative Description Target Date 2016 Progress Performance Chargeable Services Implement cost-reflective fees for 2016 A review of all services provided to customers was Review supplementary services currently undertaken and a revised fee schedule implemented for provided at no cost to customers. these services in 2016. Financial Risk Independently review and cost 2016 – 2017 This is an ongoing process – financial risks have been Management our business risks to ensure they identified and the controls in place to mitigate those risks are reflected within an appropriate have been reviewed. The next step is to put a cost on financial strategy, reducing the those risks and this is expected to be completed in 2017. likelihood of financial difficulty. Efficiency Independent review to identify 2016 – 2017 Our funding structure and tariffs have been benchmarked Benchmarking an optimum level of efficiency for against Jersey Water and water and wastewater utilities in GuernseyWater - assessing service the UK. Efficiency benchmarking has been put out to levels and cost of water and tender and this work is due to start in February 2017. wastewater service provision in comparison with companies in island jurisdictions and the UK. Performance Develop and embed a performance 2016 – 2017 A scoreboard system is in place that allows KPIs to be Monitoring System monitoring system that is relevant monitored and reported graphically, clearly showing trends to staff at all levels in our in the performance of our business. Further development organisation and reports KPIs that of our KPIs will continue in 2017. demonstrate the benefits of delivering our outcomes. Financial Strategy Joint review of Guernsey Water 2016 – 2018 Following the States recent decision that Guernsey Water Capital Structure capital structure and borrowing should pay for Belle Greve outfalls, our financial position Review requirement with Policy & Resorces. has been modelled for the next 10 years and a decision on the nature of our funding for this and future capital structure is expected in 2017. Empowered Budget Develop and empower budget 2016 – 2018 During 2016 budget holders within Guernsey Water have Management holders at all levels within our received training on budget monitoring and forecasting. organisation. In addition ongoing support has been provided by the finance team in relation to forecasting and reporting. Energy Efficiency Deliver a 10% reduction in power 2016 – 2020 In 2016 a comprehensive review of the current electricity consumption and identify tariffs for our operational sites was completed and a number opportunities for further efficiency. of changes were made. In 2017 it is planned to carry out an energy audit on a test site to assess the possibility of saving energy by changing our operating procedures. Customer 'Willingness to Where relevant for business cases, 2016 – 2020 Suitable business cases have not come forward in 2016, Pay' Surveys assess the value that customers but this will be considered for any future capital projects place on key initiatives within our that require significant financing. business plan. Establish a ‘willingness to pay’ consultation process to inform the review of our business plan in 2020. 3 3 3 3 3 7 Operating surplus before depreciation and grants as a percentage of total income (excluding interest). 8 Operating surplus after depreciation and grants as a percentage of total income (excluding interest). ! Business Initiatives ! 3 5 On Target = Satisfactory progress but not all 2016 tagets met = 2016 targets missed = 3 !