South West Water owner Pennon calls on investors to help fund overhaul

The new boss of South West Water owner Pennon has insisted vital investment plans will be funded in the “right way” as he unveiled a £550 million investor cash-call just weeks after being hit with a record £7.9 million fine for repeated sewage spills.

Keith Haslett, who was appointed chief executive of Pennon in April, said the rights issue would help support plans for around an extra £1 billion of investment as it looks to “deliver better outcomes for our customers and communities”.

The London-listed group, which also owns Bristol Water and SES Water, will also slash its shareholder dividend as part of the “operational reset”, cutting the payout by around 30% in total, also including the impact of the equity raise.

Mr Haslett told the Press Association that shareholder reaction to the plans had been “mixed”, with shares plunging by nearly a fifth in morning trading on Wednesday.

But he said: “Investment is needed to achieve improvements – we’re funding the plans in the right way”.

Customer bills are already increasing as part of existing plans to pump in about £2.6 billion of investment under plans being agreed with regulator Ofwat.

But Mr Haslett said the extra £1 billion of investment announced under his strategy overhaul will not see additional bill increases.

It follows last month’s record-breaking fine for South West Water handed down at Plymouth Magistrates’ Court for 18 charges of environmental offences relating to pollution incidents in Devon and Cornwall over a six-year period.

The group confirmed this fine would be paid for by its shareholders, separate to the rights issue, and not through bill increases.

Mr Haslett, who took on the role in April, said: “It’s clear from my comprehensive review that Pennon has real strengths, but there are areas where we need to improve and deliver better outcomes for our customers and communities.”

He added: “The operational plan, which is already under way, is practical and focuses on clearer accountability with key skills brought back in-house, and more investment where our assets need it most.”

Mr Haslett insisted the plan would “deliver a better service for customers, improve our environmental performance and generate sustainable, growing value for our shareholders”.

The group is also looking to sell its Pennon Power business, with around £25 million from the sale set to be used to reduce group debts and renewable generation at its operational sites.

Mr Haslett said he has spent six months reviewing the group since taking on the top jobs and said a better “operational grip” was needed on the business, while he is also bringing some critical roles in-house, such as leakage teams, which were previously outsourced.

He said customers would see improvements being made under the investment plans, reassuring them that leakage would start to reduce in the South West, where there have been high-profile issues with pollution, while improving supply failures and customer service.

The chief executive admitted the group had “work to do” to improve customer service in the South West Water and SES Water, but hopes this will be helped by a new customer and billing platform.