Sunday, July 14, 2024

South East Water says it needs cash injection to stay afloat

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South East Water has said it needs a cash injection from investors to stay in business as it gears up for a major Ofwat ruling on its future spending plans.

The struggling water company – which serves 2.3 million people across Kent, Sussex, Surrey, Hampshire and Berkshire – said it is “in discussions with lenders and shareholders regarding additional liquidity”.

The talks are at an “advanced” stage and bosses “expect” to raise the extra funding, but the company has not struck a deal on the investment.

“If it is not possible to raise the additional liquidity, the group and therefore company would not have sufficient liquidity for the going concern period,” it said in a results statement on Wednesday.

It added that “the risk that the funding will not be received constitutes a material uncertainty that may cast significant doubt on the ability of the group and company to continue as a going concern”.

South East Water’s parent company, HDF Holdings, is owned by NatWest’s pension fund, an Australian infrastructure investor and a Canadian pension fund.

The company is already on regulator Ofwat’s watchlist for financially at-risk companies, alongside Thames Water and other regional monopolies.

The company’s financial update will be followed on Thursday by a draft verdict from Ofwat on water companies’ five-year spending plans and bill increases to 2030. That will kick off six months of negotiations with Ofwat, before the regulator’s final decision in December.

South East Water has put forward plans that would see spending rise to £1.9bn to maintain and update its infrastructure. Those plans would also involve increasing customer bills by 22%.

The search for funding comes after South East Water’s owners provided a £150m loan to a unit in the utility group earlier this year.

South East Water’s pre-tax loss narrowed to £36m for the year to 31 March, down from £74m the year before. Turnover rose 9% to £281m.

It is also still under investigation by Ofwat for an incident in June 2023 when the company failed to deliver water to thousands of customers for more than a week. The consequences could include a hefty fine from the regulator.

South East Water said: “Since the investigation was launched, we have entered into a constructive and transparent dialogue with Ofwat.

“Our colleagues, contractors, partners and stakeholders have all played a vital role in ensuring we kept the taps flowing for as many customers as possible, even during the extreme weather which impacted on our operations and overall performance in 2023/24.

“Despite all our efforts, there were still some issues during the year and we’d like to apologise to customers who experienced any supply interruptions.”

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