Pennon Group, owner of South West Water, said the water company is continuing its strong financial performance with the publication this morning of its Interim Management Statement.
Overall financial performance of Pennon Group since 31 March 2014 remains in line with management expectations.
The statement says South West Water is continuing its strong financial performance with robust operational delivery and high standards of customer service and expects to complete the successful delivery of the AMP5 2010-2015 regulatory contract.
While 2014/15 profits will be impacted by the 2014/15 tariff freeze already announced , the revenues foregone are included in the Draft Determination for AMP6 on an NPV neutral basis.
Following Ofwat’s early Draft Determination for the AMP6 contract in April this year, Pennon said South West Water is able to accelerate a number of key projects (eg bathing water improvements) ahead of significant legislative changes.
According to the statement, with the company's track record of efficiency and outperformance, South West Water is well placed to deliver its business plan in AMP6 and will have an opportunity to outperform the assumed returns on equity.
Viridor, South West Water’s sister company in the group, is continuing its transformation from being predominantly a landfill operator to being one of the country's leading recycling, renewable energy and waste management companies.
Pennon said that while Viridor's H1 2014/15 EBITDA will be materially lower than in H1 2013/14, with five Energy Recovery Facilities scheduled to come on stream this year H2 EBITDA is expected to increase significantly and result in 2014/15 full year EBITDA exceeding 2013/14.
Year to date performance has primarily been impacted by the expected continuation of the decline of the landfill business. Highlights of the ongoing development of the Viridor Energy business include:
- Takeover of Exeter ERF was achieved on 28 July and plant operation is exceeding design parameters
- Ardley ERF commenced burning waste at the end of June and synchronised to the Grid on 25 July
- Runcorn I commenced burning waste in March and is undergoing an extensive commissioning process. Issues arising are being addressed to ensure the long term performance and consequently takeover is now expected to be in Q3/Q4 2014/15. Runcorn II is still expected to be taken over towards the end of Q4 2014/15
- Cardiff ERF is now in cold commissioning and remains on track for takeover in late 2014/early 2015
Since 1 April 2014 Pennon Group has secured/renewed £205m funding comprising:
- £80m term loan
- £75m of Revolving Credit Facilities (RCFs)
- £50m finance lease
- The £125m Convertible Bonds due 2014 have all converted resulting in the issuance of 20,908,635 Pennon shares.
The Company intends to announce its Half Year Results for 2014/15 on Friday 28 November 2014.
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