Dŵr Cymru Welsh Water has launched the next stage of its Cwm Taf Water Supply Strategy, opening formal market engagement with infrastructure investors, lenders and engineering firms for a scheme worth more than £500 million. The programme, announced in late July 2026, is intended to replace century-old treatment works, expand storage capacity and strengthen supply resilience for more than 400,000 of the company’s three million customers across South Wales. Welsh Water has described it as the largest single infrastructure investment in its history, ahead of formal procurement expected to begin in early 2027 under Ofwat‘s Direct Procurement for Customers regime.
Century-Old Treatment Assets Are Driving The Scheme’s Scope
The strategy centres on the Cwm Taf area of Merthyr Tydfil, where much of the existing treatment infrastructure dates to the early twentieth century. Plans include a new water treatment works at Dan-y-Castell Farm near the A465 Heads of the Valleys Road, a new raw water pumping station at the existing Pontsticill works and upgrades to the Llwyn-onn treatment works. Once complete, the upgrades are intended to allow the decommissioning of the ageing Pontsticill and Cantref works, the latter of which opened in 1926. Welsh Water says the strategy was identified through its Water Resources Management Plan and is aimed at meeting future drinking water quality requirements while improving long-term network resilience.
Market Engagement Runs In Two Phases Before A 2027 Tender
The engagement programme will proceed in two stages. The first involves targeted discussions with investors and lenders to test the project’s financeability and bankability. The second phase widens engagement to Tier 1 delivery partners to validate the proposed commercial and procurement model before Welsh Water takes key governance decisions. The company says the process is designed to secure strong commercial arrangements and attract the expertise needed to deliver the scheme, with formal procurement targeted for early 2027.
The Deal Sits Inside Ofwat’s Push For Competitive Delivery
Direct Procurement for Customers requires water companies to competitively tender the design, build, financing and operation of major assets to a third-party Competitively Appointed Provider rather than delivering them in-house. Under Ofwat’s 2024 price review framework, DPC is now the default route for discrete projects with whole-life totex above £200 million, up from the £100 million threshold set at the previous review. Welsh Water’s Cwm Taf scheme has featured in sector DPC pipelines alongside United Utilities’ HARP project and Anglian Water’s Middlegate treatment works, making it one of the longer-running examples of the model working through Ofwat’s approval stages.
“The Cwm Taf Water Supply Strategy is a once-in-a-generation investment that will secure resilient drinking water supplies for South Wales for decades to come,” said Ruud Haket, interim chief asset officer at Welsh Water, in the company’s July 2026 announcement of the market engagement programme.
The Scheme Sits Within A Wider £6bn Capital Programme
The Cwm Taf strategy follows a year in which Welsh Water reported £617 million of investment in its water and wastewater networks for 2025/26, including £134 million on environmental improvements, £85 million on leakage reduction and £35 million on replacing older pipes. The company has described that spending as the opening phase of a £4.2 billion capital investment programme running to 2030, part of roughly £6 billion in planned expenditure over the period. Welsh Water also raised £450 million in capital from investors in September 2025 as part of a wider transformation programme intended to improve efficiency and value for money for customers, whose average bills rose 27% earlier in the year.
Planning Applications Are Expected Before Procurement Begins
Welsh Water carried out statutory pre-application consultation on the scheme in 2025 and expects to submit planning applications later this year. Organisations wishing to take part in the market engagement events were asked to register by 10 August 2026, according to sector reporting on the programme. The company says the process is intended to refine the procurement approach before formal governance decisions are made and ahead of tender activity in 2027.
