South West Water Owner Seeks £550 Million Amidst Record Fine and Infrastructure Push
Pennon Group announces capital raise and dividend cut following regulatory penalties for sewage spills.
Pennon Group, the parent company of South West Water, is seeking £550 million from investors to bolster its infrastructure. The announcement comes days after South West Water was hit with a record £7.9 million fine for numerous sewage spills into waterways and coastal areas.
The capital raise is part of a strategic review by new chief executive Keith Haslett, who has emphasized the need for improved operational performance and customer outcomes. The FTSE 250 firm, which also owns Bristol Water and Bournemouth Water, plans to increase its infrastructure investment by an additional £1 billion, supplementing the £2.6 billion already committed under agreements with regulator Ofwat.
In addition to the equity raise, Pennon intends to reduce its dividend by approximately 30 percent and is exploring the sale of its renewable energy subsidiary, Pennon Power. These measures are aimed at helping to reduce the company's debt, which stood at £4.5 billion as of March.
Shares in Pennon saw a significant drop of 17 percent following the announcement, contributing to a 29.5 percent decline over the year.
South West Water's substantial fine was imposed after a judge described the company's actions as "reckless." The penalty includes £1.1 million for a single incident involving sewage discharge into the harbor at Polperro. In total, the water firm pleaded guilty to 18 charges, with 17 relating to illegal water discharge activities between 2015 and 2021. This is not the first recent penalty for the company; it was previously ordered to pay £1.8 million over a parasite outbreak in Devon that affected hundreds of people.
The company's financial adjustments and focus on infrastructure investment occur against a backdrop of political pressure. Prime Minister Rishi Sunak has voiced concerns about the public bearing the cost of pollution and has signaled intentions to repeal the ban on public ownership of water companies, a policy enacted under Margaret Thatcher.