Credit Investor Presentation

Glossary Term AMP6/ AMP7 APR C-MEX / D-MeX CPI / CPI-H Description Asset Management Plan periods. The five-year regulatory price control periods since privatisation. AMP6 runs from 01/04/2015 to 31/03/2020. AMP7 runs from 01/04/2020 to 31/03/2025. Annual Performance Report. Separate from the statutory financial statements, this provides detailed regulatory performance information. C-MeX: measure of customer satisfaction for AMP7. Similar to qualitative SIM assessment in AMP6. D-MeX: measure of developer satisfaction for AMP7. Consumer Price Index / Consumer Price Index including Housing. CPI-H is the UK Government's preferred measure of inflation, and will be used by Ofwat to calculate inflation of revenue and RCV in AMP7. CPI is the closest proxy for which debt and derivatives are available in the financial markets. Term Description PAYG ratio PR14/ PR19 RCV RCV run-off DWI Drinking Water Inspectorate. Independent quality regulator that assesses our comparative performance in the water side of our business. RPI Environment Agency. Independent environmental regulator that assesses our comparative performance in the wastewater side of our business. SIM FD Final Determination. The regulatory settlement Ofwat gives each company to deliver for the 5-year regulatory price control period. EA IAP ODIS Ofwat Initial Assessment of Plans. Ofwat graded water companies' business plan submissions for AMP7 across 9 key test areas and categorised the plans, leading to different timelines and base returns for higher/lower rated plans. Outcome Delivery Incentives. The rewards and penalties associated with operational performance against regulatory targets agreed for the period. Independent economic regulator for the water sector in England and Wales. TCQi Totex Pay-as-you-go ratio. The allocation of expenditure between that recovered through revenues in the current regulatory period and that added to the RCV to be recovered in future periods (see RCV run-off), helping to ensure intergenerational equity by sharing the cost of long-term investments. Price Review years. PR14: the price review process for AMP6, concluded in 2014. PR19: the price review process for AMP7, will be concluded in 2019. Regulatory Capital Value. This represents the value of accumulated investment in the company's asset base, and is used as a building block upon which companies earn a return in each 5-year regulatory price control period. The rate at which expenditure previously added to the RCV (see PAYG ratio) is recovered through revenues in a regulatory period. Retail Price Index. Until recently (see CPI-H) this was the UK Government's preferred measure of inflation, and RPI is being used by Ofwat to calculate inflation of revenue and RCV in AMP6. Service Incentive Mechanism. This is the metric used to measure customer satisfaction during AMP6, with separate assessments of quantitative SIM and qualitative SIM giving an overall combined SIM score for the period that can be used to compare performance versus peers within the water sector. Time Cost and Quality index. This is the internal measure we use to assess our capital projects, giving equal weighting to cost efficiency, quality, and on- time delivery. Total expenditure. This comprises operating costs, infrastructure renewals expenditure (IRE) and capital expenditure. Any variation from companies' allowed level of totex for the period represents out- or under-performance. United Utilities • Credit Investor presentation • 65

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