5/29/2014 Interview: Graham Keegan, chief operating officer, Eight2O - Utility Week

http://utilityweek.co.uk/news/interview-graham-keegan-chief-operating-officer-eight2o/1008542#.U4cfYvldVTA 1/4
Welcome Manmeet | Edit Details | Sign Out
Home / News / Int erview: Graham Keegan, chief operat ing officer, Eight 2O
Keywords... Search
Interview: Graham Keegan, chief operating officer,
Eight2O
16/05/2014
Share:
27 Share Tweet 0 9 0 0 Like
Trust can be destroyed in one silly email if youre not careful We watch out for how everyones
feeling.
Youve got to be in it to win it, so the saying goes.
Thames Water is taking this advice literally in regard to
delivery of its sixth asset management plan (AMP6). It
has ditched its traditional role as the client of the
contractors employed to carry out capital and operating
work in the period 2015-20. Under a new alliancing
arrangement, Thames effectively becomes one of their
number.
Eight2O is an alliance of eight powerful firms: Thames
Water; two large design and build joint ventures CVA
(Costain, Veolia, Atkins) and SMB (Skanska, MWH,
Balfour Beatty); technology company IBM; and a
programme manager, also MWH. Thames holds a 50 per
cent stake; CVA and SMB 20 per cent each; IBM 5 per
cent and MWH in its programme manager role 5 per
cent.
The companies are rewarded and penalised on the basis of collective performance, according to their
stake size. Incentives are aligned to Thames PR14 business plan outcomes. And the board works by
unanimous agreement, so no decision can proceed unless all parties agree. Eight2O will deliver at least
half of Thames AMP6 programme, and it could end up being a lot more.
So how has this Musketeers approach to AMP6 delivery come about? Thames PR14 customer research
Most Read
British Gas boss resigns
RWE attacks Ofgem over network
charges
Verdict on the Water Bill
New CEO flags room for improvement
on steady Severn Trent results
Pickles blocks eleventh onshore
windfarm
Email address... Sign Up
Newsletter
Sign up today for your daily news alert
More on Operations &
Assets
NIE set to cut 120 jobs
A total of 120 jobs are set to be cut by
Northern Ireland Electricity (NIE) as part
of a significant reduction in...
Bathing water quality rising across
Europe
The proportion of bathing water sites
across the EU classed as excellent rose
from 79 per cent in 2012 to 83 per cent
last...
Interview: David Clarke, Chief
Executive, ETI
It makes sense to establish offshore
wind as a hedge in case the UK doesnt
deliver success on other technologies.
Water companies urged to act as
beaches struggle to meet targets
Dozens of English beaches are at risk of
failing to meet tough new EU laws on
water quality, according to the
Verdict on the Water Bill British Gas has notched up pressure on
DNOs
Home News Channels Events Jobs Awards Downloads Blogs UW Intelligence About Us
5/29/2014 Interview: Graham Keegan, chief operating officer, Eight2O - Utility Week
http://utilityweek.co.uk/news/interview-graham-keegan-chief-operating-officer-eight2o/1008542#.U4cfYvldVTA 2/4
posed a challenge that will be familiar to companies across the sector: how to maintain levels of service
while keeping bills affordable. Thames opted to throw the problem out beyond its own walls.
Lawrence Gosden, hitherto Thames asset director (from next week he takes on a new role heading the
companys wholesale wastewater operation as part of a broader business reorganisation), explains: We
went out to our entire supply chain, right down to subcontractors plus people we didnt work with and
industry bodies and asked how we should tackle this conundrum for customers We went out on the
road some of our contractors told us we were the first client organisation ever to have set foot in their
offices, which is staggering. It shows something, doesnt it?
We badged the whole thing, the listening phase. Its hugely therapeutic to stop for a minute and just
listen. Its powerful. But it takes a lot to be able to do that a huge investment.
You cannot write innovation into a contract, says Gosden, but you can provide an environment to allow
innovation to flourish. He continues: You need collaboration for people to feel able to put their best
ideas on the table, and for everybody to succeed from that.
Fast forward to May 2013 and Eight2O was founded. The alliance has a number of interesting features,
beyond its basic structure and incentivisation package. First, it has swept away capex and opex
boundaries and will work entirely on a totex (total expenditure) basis, in line with PR14 principles.
Second, embedding a technology innovator within the alliance is a departure from the traditional practice
of tendering IT on a contract-by-contract basis. IBM will perform a number of roles, chief among which
will be smart analysis of the billions of points of data Thames herds, plus other publicly available datasets.
The objective is to generate insightful information to improve decision-making on the asset base and
investment priorities. The alliance is already feeling the benefit of bringing this outsider in, Gosden says.
IBM has really mixed up traditional thinking theyve a different way of attacking problems.
Third, the timing is interesting. Eight2O was set up two full years ahead of day-one delivery, which kicks
off next April. Graham Keegan has been chief operating officer of Eight2O for a year now. He is a
veteran of both the water industry generally, and joint venture-type delivery models specifically, most
recently as chair of the Veolia/Costain/MWH joint venture 4Delivery. He says the early contractor
involvement (ECI) phase (2013-15) is a real boon on a number of levels.
It has allowed him to set up a culture, a new environment and get everybody into this new way of
working. Keegan admits it was no walk in the park. The supply chain was understandably sceptical
about Thames commitment to true partnership working initially. But he says the companys behaviour
so far the listening phase, the fact that supply chain-side ideas have been acted upon, the fact that
Thames has formally thrown in its lot with contractors has built trust.
Keegan knows this is a continuing challenge: Trust can be destroyed in one silly email if youre not
careful We watch out for how everyones feeling. What are people saying about us? Are we giving the
right behaviours? Are people taking the right approach? Are people supportive of one another? Are there
any factions building up?
Another key advantage of the early start is that Eight2O can hit the ground running. Keegan is confident
the inter-AMP dip that has blighted the water contracting industry for years simply wont happen this
time around for Thames. He says: Were looking at the AMP6 programme two years in advance and at
how the work is falling away in AMP5, and were marrying those two differences if you can have the
build up at the same time as you have the drop off, thats how you minimise the dip.
Finally, Keegan says ECI has provided thinking time ahead of the major delivery phase to engage
brain. In fact, there has been a real push on encouraging supply-side partners to innovate, contribute
new ideas and trust Eight2O to deal with them fairly. According to Keegan, the alliance is working
through literally hundreds of ideas that have been pitched so far from the supplier community.
So, in Keegans expert view, does Eight2O really amount to a new approach to AMP delivery? It does, he
says. Alliancing is a word many people use. Weve seen lots of JVs, lots of partnering, but the way were
approaching this is unique. He says there is a real connection with being inside Thames Ive never
seen that before They include me and the team as a department almost, and thats one of the cultural
changes. So I think it is very different. Im not sure theres anybody whos gone into this depth of
alliancing.
Eight2O will build on Thames AMP5 achievements, which include, according to Gosden: a fast-start (1
billion of a 5 billion capital programme invested in the first year); four successful framework contracts
responsible for delivering half the whole programme; a suite of on-time major projects including the 635
million Lee Tunnel; and the reinvestment of 100 per cent of capital efficiency gains for customer benefit.
For AMP6, Thames proposes a totex of around 7 billion: 3.16 billion for water wholesale and 3.8
billion for wastewater wholesale plus 500 million to cover its Thames Tideway Tunnel investments
(construction costs will be borne by a separate infrastructure provider). Particular highlights of its two
wholesale plans (one for water, one for wastewater) include: 10 per cent leakage reduction by 2020
supported by the replacement of 880km of mains; reduction of supply interruptions; the installation of
Environment...
Kype Muir windfarm granted
planning permission
The Kype Muir onshore windfarm has
been granted planning consent by the
Scottish government.
Jobs
Process Engineer
Aqualogy is the global technology and
solutions division of Agbar, one of the
world's largest water and waste water...
Knowledge Partners
Knowledge Partners
Stay up to date with the latest
utility industry news, analysis and
comment
5/29/2014 Interview: Graham Keegan, chief operating officer, Eight2O - Utility Week
http://utilityweek.co.uk/news/interview-graham-keegan-chief-operating-officer-eight2o/1008542#.U4cfYvldVTA 3/4
900,000 smart meters; protecting 1,800 properties from internal sewer flooding; cutting pollution
incidents; reducing odour risk for 6,600 homes; and supplying one-third of company power needs from
home-grown renewables.
Contrary to the impression given by much of the media, average bills will fall slightly from 360 in 2015
to 358 in 2020, if the cost of the Tideway Tunnel is excluded. Adding in the 8 a year cost of the tunnel
takes the average 2020 bill to 398, which is still among the lowest in the industry. Efficiencies deriving
from Eight2O have already been factored in to these numbers. So were already behind the plan by
about 160 million, says Gosden.
Thames did not get an entirely glowing report from Ofwat on its business plan. In particular, its
wholesale wastewater totex was deemed too high (3.8 billion compared with Ofwats threshold of 3.58
billion) and insufficiently evidenced. Gosden takes an optimistic view: The best thing about the risk-
based review is it has provided a view, and its enabled us, and all the other water companies, to
commence a dialogue with Ofwat.
The two main factors muddying the wholesale wastewater number are how Thames has incorporated
Tideway Tunnel costs into its plan and uncertainty around spending on the national environment
programme, which (helpfully) wont be set by the Environment Agency until after final determinations.
Gosden says its now more about explaining its numbers to Ofwat and working to resolve uncertainty
than about reducing the numbers.
He does not anticipate a great deal of change in Thames broader wholesale plans: Were listening very
carefully to customers and to the feedback of the risk-based review, and were considering it. But we do
really believe in our fundamental core plan. We put a hell of a lot of work into that plan to make it very
evidence-based and connected very much to what customers were saying to us. So in the core part of the
plan, would we expect to see a huge amount of change? That is unlikely.
While it requires some management, Keegan says regulatory business plan ping-pong will not unduly
hinder Eight2Os start: It is slightly in limbo but theres a big core element of the work that were
confident will go ahead and thats what well put our main focus on.
Even excepting the tunnel, it is never going to be plain sailing for Englands largest, highest-profile, most-
scrutinised water company. Gosden and Keegan are the first to admit that Eight2O has yet to prove itself,
and that while they think its particular brand of alliancing is right for Thames, they can see the merits of
other AMP6 delivery arrangements being drawn up around the industry.
That said, both are clearly excited and delighted by the alliance they have come up with to tackle the
challenges of AMP6. Keegan concludes: Its really exciting when you think, we could actually get
something different this time. We could do this. We could crack those problems weve been having for
years.
Author: Karma Ockenden,
Channel: Operations & Assets , Policy & Regulation
Tags: Environment Agency (UK) , Thames Water , Water Services Regulation Authority , Domestic
Water and Wastewater Retail , Metering , Smart Metering , Finance and Investment , Regulation ,
Government and NGOs , Ofwat
Share:
27 Share Tweet 0 9 0 0 Like
Related News
NIE set to cut 120 jobs
A total of 120 jobs are set to be
cut by Northern Ireland
Electricity (NIE) as part of a
significant reduction in...
New CEO flags room for
improvement on steady
Severn Trent results
Severn Trent underlying profits
rose 4.3 per cent to 517 million
in 2014, it reported on Thursday.
Modest growth in the...
British Gas boss resigns
The boss of British Gas, Chris
Weston, has today handed in his
resignation after only 15 months
in charge.
5/29/2014 Interview: Graham Keegan, chief operating officer, Eight2O - Utility Week
http://utilityweek.co.uk/news/interview-graham-keegan-chief-operating-officer-eight2o/1008542#.U4cfYvldVTA 4/4
Ofgem appoints enforcement panel
1 comment a month ago
Don Mac Mmmm.. Pretend jobs springs to
mind, why don't the government grow a back
bone and break up the mighty power of
Sewers suffering from flood defence failures
1 comment 3 months ago
Harsha Anand The issue is not about who
needs to do something. Everyone knows that
the only party who can do something about
Cameron: Europe needs to embrace the
opportunities of shale gas
1 comment 4 months ago
Mike Parr "if shale gas is developed it will help
with the re-shoring of jobs, as businesses
return to the UK"The EC
Smart meter IHDs could help customers
save 6bn
1 comment 2 months ago
q2w3e4rt smart meters (with with consumer
display ... )"persistent savings of around 3%
"www.parliament.uk/briefing-pap...For a
ALSO ON UTILITY WEEK
0 Comments Utility Week Login
Sort by Best Share
Start the discussion
Be the first to comment.
WHAT'S THIS?
Subscribe Add Disqus to your site
Favorite
UW Magazine UW Intelligence Awards Advertise Contact Us
About Us
edie WWTonline Desalination & Water
Reuse
Iwex Resource Ireland
Visit
Faversham House Ltd 2014. Arti cl es may be copi ed or forwarded for i ndi vi dual use onl y. No other
reproducti on or di stri buti on i s permi tted wi thout pri or wri tten consent or the rel evant l i cence from
the Copyri ght Li censi ng Agency
Cooki e & Pri vacy Pol i cy