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Yorkshire Water step closer to removing Cayman companies

By Kathy Pigden from Utility Week

Yorkshire Water expects to receive the final regulatory clearances to remove its companies in the Cayman Islands within the next few days.

The company has early summer in its sights to bring the bonds which sat within Cayman Islands subsidiaries back onshore to UK firms.

It first announced its intention to close its offshore banking arrangements, which it uses to manage high levels of borrowing, in October 2017.

Thames Water followed in November and Anglian Water outlined a raft of commitments last month, which will see it “speed up” the removal of its Cayman Islands subsidiary.

Liz Barber, group director of finance, regulation and markets at Yorkshire Water, told Utility Week: “When we first announced the plan to remove our Cayman companies back in October last year, it was pleasing to see that our colleagues in other companies with similar structures decided to follow suit.

“We also said at the time that removing the companies was far from straightforward and would take some time, with a range of legal and regulatory approvals.

“Nonetheless, we’ve moved as quickly as we could and should receive the final regulatory clearances in the next few days. Once this is complete, we can bring the bonds which sat within the Cayman companies back onshore to UK domiciled companies. That should be done by early summer and then the administrative process of striking the Cayman companies off can by finalised shortly after.”

She added: “We’ll be reporting on the final stages of this process when we publish our report and accounts in July.”

At Water UK’s annual City Conference in London last month, environment secretary Michael Gove directly challenged the sector to be “transparent and accountable”. He accused some companies of appearing to be “intent on financial engineering just as much as real engineering”.

He said Thames, Southern, Anglian and Yorkshire “make particularly keen use of sophisticated financial engineering” having set up “multi-layered corporate structures of dizzying complexity involving multiple subsidiaries, some based offshore.”

Yorkshire Water plans to reduce its leverage to 70 per cent by 2020. The firm’s gearing, currently equates to 76 per cent of its total asset value.

Last week, Ofwat’s chairman Jonson Cox set out a programme of reform to bring the water sector “back in balance” and rebuild public trust.

It was followed by several chief executives from water companies meeting the secretary of state on Monday (16 April) ahead of his response to Cox today (18 April).

The roundtable included Yorkshire Water’s Richard Flint, along with Ian McAulay from Southern Water, Steve Robertson from Thames Water and Peter Simpson from Anglian Water.

Gove highlighted companies “committed to action in a range of areas, including tying executive pay and dividends more closely to performance improvements, sharing with customers additional gains from high gearing, and closing offshore financial structures in the coming months.”

Anglian Water, Southern Water, Thames Water and Yorkshire Water are at an advanced stage of closing down their Cayman Island entities, and are due to complete the process this year, according to a statement from Water UK.

Michael Roberts, chief executive of Water UK, said: “Companies fully support the need to resolve concerns about financing and governance arrangements in the sector, and are already taking swift action.”

Towards the end of last year, Yorkshire Water unveiled a multi-million pound plan to transform its operational performance as it looks to become a top performer in the water industry.

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IMAGE: Yorkshire Water logo


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