Abstract
This thesis examines the structure created by Glas Cymru, the owner of Dwr Cymru Welsh Water (DCWW). As a not-for-profit, debt-funded structure, this approach is one of a kind in the privatised water industry of England and Wales. The change to a not-for-profit company introduced some unique characteristics. First, it disposed of equity altogether, and sourced its financing through debt. This appeared to break away from the idea of privatisation. The removal of shareholders from the company also invited doubts from industry observers with regard to the company's ability to maintain sufficient pressure to perform. The policy of outsourcing most of its functions, including its operation and maintenance, broke away from the traditional view that the core functions of a company should be kept in-house. By outsourcing most of its functions, the company was thought to run the risk of losing control of the business of supplying water and sewerage services. The changes caused by Glas Cymru effectively made it the odd one out in the water industry in England and Wales, raising regulatory concerns on how such a structure should be managed in an equity-based, shareholder-driven industry.These developments prompted this research, to investigate whether or not such a structure is suitable for the water industry in Wales in particular, and in England and Wales in general, and whether the company is at a regulatory disadvantage by adopting this structure in the water industry in England and Wales. As this research attempted to delve into a new development in the water industry, it relied mainly on qualitative data collected through interviews with various industry stakeholders. Additionally, quantitative data obtained from various reports produced by water companies and the regulators were used to strengthen the qualitative data.
The research concludes that the structure is suitable for the water industry in England and Wales. Similar methods are also used in Europe, particularly France. While the structure is suitable for the water industry, however, it is not easily replicable by other companies in this privatised industry. The advantages enjoyed by Glas Cymru may also be 'neutralised' in the next periodic review, reducing the anticipated benefits after 2005. However, financial reserves accumulated during the first few years actually helped the company to achieve relatively lower gearing compared to conventionally financed companies. As more companies move towards greater debt-funding, it is necessary for the regulator to be more receptive to the way the industry evolves.
| Date of Award | 2004 |
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| Original language | English |