Two of England’s privatised water monopolies, the South West Water owner Pennon and United Utilities, have said they will increase dividend payments to investors, as they prepare to raise household bills.
The companies said they had accepted the regulator Ofwat’s final determination of what they may charge customers – removing the possibility of an appeal to try to argue that bills should be higher. The decisions mean the companies will go ahead with increases in bills of 23% for South West Water and 32% for United Utilities over five years from April.
Ofwat informed water companies before Christmas of the bills increase it would allow over the five-year period, with an average rise of 36% across the different companies in England and Wales. As part of that calculation, Ofwat allows water shareholders to make an agreed return on their investment.
Pennon said its dividend would increase in line with inflation from £129.3m for the year to 31 March 2024. The inflation measure chosen was at 3.5% in the year to December.
United Utilities, a member of the FTSE 100 that provides water in north-west England, also said it would also raise its dividend in line with inflation, after paying out about £340m to investors in 2023-24. The company said it had “strong operating performance” in the final three months of 2024.
Louise Beardmore, United Utilities’s chief executive, said: “With the final determination agreed, we are now able to progress what will be the largest investment in water and wastewater infrastructure in over 100 years, to build a stronger, greener and healthier north-west.”
United Utilities has faced anger from clean water campaigners over sewage discharges into Windermere in the Lake District.
Pennon last year faced strong criticism over a pay increase of £300,000 for its chief executive, Susan Davy, weeks after an outbreak of diarrhoea caused by a parasite in Devon’s water supply. Pennon also faced calls for it to suspend dividend payments after the outbreak.
Neither Pennon nor United Utilities are under the same financial pressure of struggling counterparts such as Southern Water or Thames Water, which is trying to raise billions of pounds of new debt and then equity amid the threat of temporary nationalisation.
Other water companies could still appeal to the competition regulator against Ofwat’s decision in the hope of charging customers more – a controversial prospect given the widespread outrage over the extent of sewage released into Britain’s rivers and seas.
However, Pennon investors took fright after the company said it needed to raise £490m to carry out the increased investment required by the regulator.
Pennon’s share price fell by as much as 7.8% on Wednesday morning after it announced the rights issue, hitting its lowest level in 13 years. The company was the biggest faller on the FTSE 250 index of mid-sized companies in early trading, before recovering some of its losses.
The share price of United Utilities dropped in early trading before rising by 1%.