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Cost of loans may hold back acceleration of water work

Uncertainty over the cost of borrowing capital to fund investment up to 2015 could prevent water companies accelerating work for the next regulatory period to help boost the general economy.

Water companies produced their final business plans for Asset Management Period (AMP) 5 from 2010 to 2015 on Tuesday.

Regulator Ofwat is due to make its final determination in November. Anticipated capital expenditure for the five years from 2010 by the 10 major plcs alone could approach £30bn.

The government is reportedly pressuring the companies to get on with that spending and avoid the traditional 12 month dip in workload between AMP periods – due this year and already making itself felt – to help the economy.

But the cost of funding that level of investment in a climate where it is more difficult to borrow money could have a knock-on effect on what the companies can afford to do without additional cost to the consumer. And until the cost of capital is resolved companies are reluctant to accelerate work.

“Water companies are not exempt from the impact of recession and will have to look at the phasing of their activities,” said a spokesman for industry body Water UK. “But there is no question that the companies are committed to carrying out their obligations.”  

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