Pennon Group (PNN) Investor Update summary

Strategic investment and regulatory acceptance

• Announced a record £3.2 billion investment plan for water businesses through 2030, supported by a fully underwritten £490 million rights issue.

• Accepted Ofwat's PR24 Final Determinations for South West Water and Sutton and East Surrey Water, with no referral to the CMA, securing nearly all requested revenue and 97% of Totex requirements.

• Recognized previously unfunded expenditure, resulting in a 20% RCV uplift and enhanced financial risk protection.

• SWW's plan received 'Outstanding' status, SES Water 'good/standard', with equity uplifts and improved cost of capital allowance to 4.03%.

• Investment is split with one-third funded by customers and two-thirds by investors, resulting in one of the lowest bill increases in the sector.

Operational and financial performance

• Projecting 34% organic RCV growth for K8, with a front-loaded CapEx profile and £3.2bn capital investment to drive early operational improvements.

• Achieved industry-leading or upper quartile performance in key service areas and maintained strong returns on regulated equity (6%-8%), targeting c.7% RORE.

• Totex allowances of £5.6bn (nominal), with £86m targeted annualised efficiencies and a 12% overall efficiency challenge.

• Maintaining water business gearing at 60%-65%, with group leverage slightly higher, supported by cost synergies and the rights issue.

• Financeability confirmed on both notional and actual bases, with equity injections assumed to maintain resilience and strong investment grade credit ratings.

Customer, community, and environmental outcomes

• Committed to keeping bill increases as low as possible, with a £200 million affordability support package and innovative tariffs.

• Launched WaterShare+ scheme, giving customers a stake in the business and sharing £40 million in benefits, expanding to SES region.

• Over 115,000 customers on social tariffs, with the largest ever package of affordability measures.

• Supporting regional investment, job creation, and infrastructure development, especially in the South West.

• Ambitious targets for storm overflow reduction, 4-star EPA rating by 2028, and sector-leading biodiversity and GHG initiatives.