UK Market Report
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One factor which needs to be considered in the UK following the successful purchase of Innogy by RWE is the fact that the latter already owns Thames Water, the largest water company in the UK. RWE's main focus as it reorganises a raft of businesses which have in the past included a significant range of non-utility operations is now on energy-related businesses. This is despite the fact its purchase of Thames Water in 2000 was seen as part of its aim to be a major player in the water sector worldwide, as it attempted to build itself into a multi-utility company covering not only gas and electricity but also water and waste operations. The conclusion therefore is that if Thames is to remain a core part of the group - and that at present goes without saying - then RWE is going to be looking to make further links between its UK businesses, perhaps not in the area of cross-selling energy to the Thames customers, although that remains a realistic option for RWE. There can be little doubt that Brian Count at Innogy will be looking to discuss with Bill Alexander at Thames ways in which the two companies can work together. But selling energy is not a major profit deliverer in the context of a large group. Much more significant are the opportunities for reducing costs by bringing together the support services involved in running two such large companies with up to 12 million customer accounts between them. The favourite areas for consolidation can therefore be seen as merged IT activities including the operation of billing centres and support services centres. Innogy is just going through a process of rationalising and consolidating its service centres but there must be plenty of scope for further support service rationalisation in the two companies. However, the physical overlap in terms of geographic areas is very small.
