Business Weekly - Cambridge, UK

Chris Mellor, CEO of the Huntingdon-based company, is presiding over what is tantamount to an historic re-engineering of the business.

It has gone from a basic water supplier to a respected international consultant on a range of infrastructure issues.

Now Mellor and his senior management team are taking the global business a rung or two higher.

The group intends to renegotiate its £2.6bn debt and raise £800m new debt. Mike Keohane, group director of HR and communications said: “All of that debt will be in Anglian Water Services, and that division will then be ring-fenced.

“That will mean that the unregulated infrastructure management side of the business will have no debt and will be in a very strong position to grow.”

The infrastructure management divisions provide services to a number of sectors including water, utilities, government and transport. The group aims to become a leader in the management of UK infrastructure by 2005.

AWG has drawn up a three year plan for the infrastructure management divisions, requiring them to be cash positive each year and to target double digit earnings growth. The forward order book value for the infrastructure management business at November 2001 was in excess of £3bn.

The utility services and government services divisions have been identified as the engines for future growth.

Utility Services has won a significant market share in outsourced utility management with companies like Centrica, while the government services division has been positioned to take advantage of the government’s PFI and PPP policies.

Keohane said: “We are already finding that relationships we have built up with Norwich City Council and North Lanarkshire District Council are bearing fruit. As local councils get to know us better, they are giving us business further up the value chain - that’s where first mover advantage comes in.”

Demerging its water business remains a definite option. Keohane said AWG would finance any future acquisitions through the divestment of off-strategy businesses rather than debt. The company will be shedding its vehicle leasing business but has not yet finalised further divestments

Keohane said: “We will be shedding some jobs in the regulated water business and in off-strategy businesses, but that will be off-set by growth elsewhere in the group. For example we are currently bidding on a contract put out by Sheffield City Council, which, if successful, will see 1,000 jobs swap over to AWG.”