Moody’s Ratings has downgraded South East Water (Finance) Ltd to Ba1 from Baa3 and assigned a Ba1 Corporate Family Rating (CFR) and Ba2-PD probability of default rating to South East Water, taking it to junk status and putting it in breach of its licence condition with Ofwat.

South East Water (Finance) Ltd is the financing subsidiary of South East Water. The ratings agency also says the outlook remains negative

As a condition of its operating licence with the regulator, Ofwat, South East Water must maintain at least two investment grade credit ratings - Moody’s is one of its two ratings agencies.

The ratings action relates to the fallout from two high profile water outages – one at Tunbridge Wells in November-December 2025, and a second outage in January 2026 and a second outage in January 2026 affecting customers supplied by the company in Kent and Sussex.

Moody’s also says the ratings could be downgraded if there are further significant supply outages.

Last week’s heatwave saw thousands of the water company’s customers in Kent again faced with water supply issues, which the company said was driven by high demand for water.

South East Water continues to apologise to customers for the ongoing water issues. The latest update issued yesterday on the utility’s Twitter/X account says:

“Water continues to return to our remaining customers experiencing supply issues in Kent.

"We have opened our bottled water stations again today, please visit our website for an update.”

The company had set up bottled water stations at five locations.

Moody’s rationale for the ratings action says:

“Today's rating action reflects the rapid crystallisation of resilience risk for SEW following two high profile outages over winter 2025-26. The downgrade takes into account both the fallout from those outages and the continued resilience risk the company faces until its medium- to long-term investment programmes are completed.”

A statement issued by the company in response to the downgrade said the Board of South East Water is constructively engaging with Ofwat, the Company’s regulator, to agree certain commitments that will secure a return to compliance with its licence conditions. The commitments once agreed with Ofwat will be communicated.

South East Water said it maintains strong liquidity and a resilient capital structure. Moody’s has noted that the Company is expected to demonstrate solid financial metrics for the rating level.

Andrew Farmer, South East Water Chief Financial Officer, commented in the water company’s response:

“South East Water is implementing a company-wide transformation following network incidents last year to improve our operational performance and deliver on our most important priority, which is a resilient supply network for our customers.

This will enable South East Water to deliver record levels of investment, with the support of customers across Kent, Sussex, Surrey, Hampshire and Berkshire, totalling £2.1 billion between 2025-2030.”

On Friday lastr week South East Water published its draft Drought Plan 2027–2032, which sets out the steps it would take during periods of drought or high demand to ensure it delivers a reliable drinking water supply for the essential needs of drinking, washing, cooking and cleaning.