1. Establishing a national water utility company - The Scottish Experience BLP Water Forum 25 th June Craig Lawson 15 mins

2. Agenda for the Presentation 1. Context 2. The Scottish Water Journey from the perspective of: Employees Regulation Supply Chain 3. Why has it been worth it so far

3. Irish/Scottish Water - Differences Differences Scotland’s Water & Drainage service provider: Pre 1996 - 38 Municipalities ran water and drainage 1996 - combined into 3 regional water authorities 2002 -Scottish Water created by merger of 3 regional authorities Transfer of People Customers in Scotland have always paid for their water and sewerage

4. Irish/Scottish Water - Similarities Similarities Implied Inefficiencies & Poor Customer Service EU Directives – Large scale investment required Public sector Geographical & Population size similarities

5. SW High Level Deliverables Targets 2002 – 2006 40% OPEX reduction £2.3 Billion Capital programme for £1.8B (£0.5 Billion saving) Improve customer service

6. 2. Scottish Water Journey from the perspectives of: Employees Regulators Supply Chain

7. Scottish Water : A burning platform

8. Employees 2002 – 2006: “Do less for less” Disbelief, some denial of situation, survival mode Transformation driven by ‘others’ – everything changing Lots of people leaving 2006 – 2010: “Do the same for less Some respect for achieving 02 – 06 targets Our own people now more involved in Transformation projects Roles profiles, T&C, business processes, tools, reports converging towards consistency 2010 – 2015: “Do more for less” Transformation delivered by our own people – more planned Engagement Very High Performance related pay, bonus, employee performance measured, coaching/mentoring leadership New recruits joining the business

9. Regulators 2002 – 2006 Imposing a ‘contract’ on us Each regulator wanting their priorities 1st 2006 – 2010 Beginning to work in partnership with regulators Stakeholder management structure in place 2010 – 2015 We now lead the development of the investment programme in a collaborative manner Regulators trust that we know our business and our customer’s needs best Working together “Scottish Water has outperformed its projections in the areas of investment in the 2010-15 programme, levels of service to customers, leakage reduction, investment costs and financial strength.” WICS 2012

10. Supply Chain 2002 – 2006 High number of small suppliers Very aggressive cost challenge on OPEX spend Knowledge brought in from England & Wales through JV New Jobs created in £450M per year Capital Programme 2006 – 2010 Reducing number of suppliers – frameworks deployed Some outsourced opportunities Working to ‘Break the Cycle’ 2010 – 2015 Small number of suppliers – Alliances (11 years)/Frameworks Focus on value and outputs Long term security of work

11. 3. Why has it been worth it so far…. Average Household bill would have been approx. £110 higher than our current £324 We have delivered our statutory objectives at £2.5 billion less than we had proposed in our Business Plans (BP’s from 2001 & then 2005) Performance OPA up from 132 points to 368 points Helps enable inward investment in Scotland Competition gave our 130,000 Business Customers a choice of retailers

12. OPA in Customer ‘speak’ Measure06 - 0711 - 12 Inadequate Water Pressure7,772902 properties No of Properties supply restored > 6 hours 35,41521,803 properties Leakage1003.8629 ML/d Water Quality (Customer Taps)99.66 (577 fails) 99.84% Wastewater Pollution Incidents (Cat1 & 2) 931499 incidents Sewer Flooding Properties at Risk772267 properties Customer Experience Transactional Score 58%90% (today)