Bringing all the utilities into one joint venture

Utilities companies have not had the best of reputations with their developer clients. A survey carried out late last year by the Home Builders Federation revealed the extent of the problem: more than 70% of builders were not happy with their service from electricity providers, and almost the same proportion were unhappy with the service they got from water companies. The survey showed that almost a quarter of utility companies are taking between six months and a year to connect services, and that because of this delay, more than 60% of developers were unable to complete a property on time.

It all begs the question: is there a better way? Developer Land Securities thinks it has come up with a positive response. It is entering into an agreement for multi-utility provision across one of the Thames Gateway’s largest emerging developments, Ebbsfleet Valley, in Kent, that is aiming to eliminate the problems that have dogged development for years.

“With our infrastructure burden, we had to be clever,” says Andy Freeman, project director with Land Securities. On the 1000 acre site beside Ebbsfleet station, Land Securities is developing some 10,000 homes and 9 million ft2 of office, retail, leisure and community space under a 20-25 year build programme, expected to get under way later this year. Installing the pipelines and cables to serve all the buildings with essential services will be a massive task.

How the deal works

Under the deal, Land Securities and utilities companies Thames Water Services and EDF Energy are creating a joint-venture company, Ebbsfleet Valley Utilities. This joint venture will install electricity, gas, water and sewerage, and operate those assets over a 40-year contract period.

Last November Land Securities signed a legally binding interim agreement with Thames Water Services and EDF Energy for multi-utility provision across the site. The deal is interim because regulatory approvals and licences must be obtained from regulators Ofwat and Ofgem before the full agreement can be signed. The joint venture is on target for a formal application for water and waste water inset and electricity independent distribution network operator licenses in the first quarter of this year.

The deal does not cover generation of power, only distribution, but crucially should ensure that the developer does not face the all too common problem of having completed buildings unconnected to essential services.

Freeman explains: “The single entity will be able to create efficiencies in design and installation. And by sitting on the board of Ebbsfleet Valley Utilities we can tailor the utility roll out with the build roll out.” Land Securities’ role in EVU gives it contractual transparency on infrastructure costs and certainty in delivery.

Long-term involvement

The developer says it is committed to taking an active role in the overall management of Ebbsfleet Valley through the life of the project and this includes the promotion of efficient installation, maintenance and operation of the utilities. This level of involvement has not been possible in conventional utility provision, but is considered vital in the 20 to 25-year build programme where the earliest customers at Ebbsfleet Valley will be advocates of the service for new customers.

For the consumer, this more streamlined approach could enable a one-stop shop for billing, help desk, technical support, smart metering and an active approach to sustainability at a cost in line with standard utilities provision. Consumers will still be able to choose their energy provider.

For Land Securities, the key achievements so far in developing the venture have been the establishment of a common vision between participants and the apportionment between development risk and utility operations risk.

Sitting at the same table through the project should give each partner in the joint venture a greater understanding of each other’s involvement – and that could benefit the broader development industry. Freeman says: “There has been a lot of education on our side, but a lot of the learning is now done.”