Water firms cheer ruling
WATER companies breathed a sigh of relief yesterday, as industry regulator Ofwat’s price ruling proved less aggressive than anticipated.
In its long awaited report on pricing structure at the utilities, the regulator said bills in England and Wales would increase by an average of 0.5 per cent a year between April 2010 and March 2015.
Earlier this year, it had put out draft proposals saying bills should be cut by an average of 0.2 per cent, leading to worries of dividend cuts and a flood of M&A in the sector.
Typical bills will drop by £3 to £340 by 2015 before inflation, the ruling said.
Shares at water companies were boosted on the back of the news, with United Utilities finishing up 0.35 per cent, Severn Trent closing up 3.78 per cent and Pennon up 1.07 per cent.
“Ofwat has increased allowed revenue for companies compared with the draft determinations which will be welcomed by water companies. However, the outcome remains challenging in terms of both operating and capital cost efficiency,” PricewaterhouseCoopers’ Duncan Michie said.
Most of the major water companies have seen their profits jump this week in spite of the downturn.