UK water firms eye hefty investments, rising bills

Demonstration against sewage dumps in Cornwall

By Prerna Bedi and Eva Mathews

(Reuters) -Several UK water firms on Monday proposed investing billions of pounds to tackle water quality, leakage and pollution issues, in a move that an industry body said would see bills rise by an average of 156 pounds a year per household by 2030.

The investments are part of regulator Ofwat's price review programme, wherein water utilities set out their plans for the next five-year regulatory period to drive up performance and keep in line with environmental guidelines.

South West Water's parent firm Pennon Group said it would invest about 2.8 billion pounds ($3.4 billion) over 2025-2030, while United Utilities submitted a total expenditure plan of 13.7 billion pounds across the same period.

Britain's biggest water supplier Thames Water, which was rescued from a financial crisis earlier this year, said it plans to invest 18.7 billion pounds.

These plans are subject to approval, and the England and Wales regulator will provide its final decision on the proposals in December 2024.

As a result of these record investments totalling 96 billion pounds, the average bill increase in England is expected to be an additional 7 pounds per month by 2025 and that is expected to increase to 13 pounds per month in 2030, according to industry body Water UK.

Britain's water companies have come under fire from customers and the government alike for piling up debt and permitting shareholders and executives to profit at the expense of the ecosystem.

The industry, which was privatised in 1989, has also come under intense scrutiny over sewage releases which have dirtied rivers and beaches and hammered public confidence in the sector over price increases in the middle of a cost-of-living crisis.

"The problem the utilities face is that the costs of borrowing have gone up significantly and this makes the juggle between rewarding shareholders, funding investment and keeping a lid on bills a difficult one. Households will absorb a lot of the pain but investors will have to take their share too," said Russ Mould, investment director at AJ Bell.

Ofwat's annual performance report last week noted that only five out of 17 water companies under its watch achieved their targets on reducing pollution incidents, while half met their performance commitment on leakages in the 2022-2023 fiscal year.

Last Friday, Severn Trent announced plans to invest 12.9 billion pounds under the programme and said it will raise 1 billion pounds to help finance the investment.

United Utilities said it had "options and flexibility" around financing its plan, including a 1.35 billion pound equity raise. There will be "no need to raise equity", however, given a "strong balance sheet", Chief Financial Officer Phil Aspin said during an investor presentation on Monday morning.

Shares in Pennon and United Utilities were up 3.9% and 1.8% on Monday afternoon.

($1 = 0.8214 pounds)

(Reporting by Prerna Bedi and Eva Mathews in Bengaluru; Editing by Rashmi Aich and Hugh Lawson, Kirsten Donovan)