UK utility Pennon swings to pretax annual loss on investment costs

(Reuters) -British water utility Pennon Group swung to an annual pretax loss on Tuesday, hurt by costs associated with the Brixham water supply incident and higher investments to upgrade its infrastructure.

WHY IT'S IMPORTANT

Britain's water companies are facing increased scrutiny due to pollution issues and mounting pressure to improve environmental standards while managing rising costs and regulatory demands.

Water bills in England and Wales will increase by an average of 31 pounds per year between 2025 and 2030, according to industry regulator Ofwat's 2024 price review, to help finance essential investment in the sector. This is 8 pounds lower per year than what companies proposed in their plans, on average.

CONTEXT

Pennon, along with listed peers United Utilities and Severn Trent, agreed to Ofwat's price review, unlike several privately owned water firms that appealed. In exchange for higher permitted income, Pennon is committing to invest 3.2 billion pounds ($4.33 billion) over five years in infrastructure upgrades.

Ofwat's latest price review permits South West Water, the group's largest revenue contributor, to raise household bills by 23% leading to an average bill of 610 pounds by 2029-30. The group is partly relying on these higher tariffs to fund upgrades and meet tougher environmental standards, while restoring public confidence following recent pollution incidents.

KEY QUOTE

"While we have made the tough decision to put bills up in 2025-26, for the first time in over a decade, two-thirds of our investments are being funded by our supportive investors and debt providers," CEO Susan Davy said in a statement.

BY THE NUMBERS

Pennon reported adjusted loss before tax of 35.1 million pounds for the year ended March 31, narrower than market expectations of about 37 million pounds loss, according to data compiled by LSEG.

($1 = 0.7392 pounds)

(Reporting by Ankita Bora in Bengaluru; Editing by Eileen Soreng)