14 February 2014
PENNON GROUP PLC
INTERIM MANAGEMENT STATEMENT
Overall financial performance at Pennon Group since 30 September 2013 remains on track to meet management expectations.
South West Water
South West Water is continuing its robust performance against the 2010-2015 regulatory contract and is well placed to outperform its assumptions. Despite the exceptional weather and resultant flooding in the South West, the company continues to deliver effective operational performance and high standards of customer service, underpinned by strong financial performance.
On 2 December 2013, South West Water submitted to Ofwat its Business Plan for the next five year period, 2015-2020 (K6). The plan reflects the most extensive customer/ stakeholder engagement and research ever undertaken by the company and feedback indicates it has achieved 84% acceptability from customers. Details of the Business Plan and an investor summary can be found on the South West Water website, http://waterfuture.southwestwater.co.uk/investor-summary
On 19 December 2013, Ofwat published a revision to the ongoing K6 price review process. As part of this revision on 27 January 2014 Ofwat published risk and reward guidance for the industry. This included guidance on key financial parameters, including the cost of capital for the K6 period. The company is currently reviewing this guidance.
As stated previously, this is a transitional period for Viridor. The company has made excellent progress in establishing its Energy from Waste ("EfW") business which will transform Viridor into a leading player in the UK renewable energy sector. Notwithstanding the adverse weather and difficult trading conditions, Viridor is successfully holding operational performance broadly in line with management expectations and operating contribution is slightly ahead of last year. PBIT plus joint ventures is still expected to be broadly similar to last year but has been impacted by increased pension costs as a result of auto-enrolment and by the outage previously flagged at Lakeside.
Significant progress has been made on the EfW asset base:
· Runcorn I and Exeter - both now in commissioning and will begin burning waste by the end of March
· Ardley - commenced commissioning earlier this month
· Runcorn 2 and Cardiff - will shortly enter commissioning
· South East Wales residual waste contract (Prosiect Gwyrdd) - signed in December 2013
· Glasgow and Peterborough - excellent early construction progress
· South London Waste Partnership PPP (Beddington) - "Notice to Proceed" expected shortly
The EfW contracts and projects already contribute to Viridor's bottom line and reflect the realisation of our business strategy.
Since 30 September 2013 Pennon Group Plc has:
· Drawn down £60m from the EIB and a further £130m facility being progressed
· Renewed and increased a £60m term loan to £100m
· Drawn down a £30m Revolving Credit Facility (RCF)
The Company intends to announce its Preliminary Results for 2013/14 on Tuesday 3 June 2014.
Further information on Pennon, South West Water and Viridor can be found on the Group's website, www.pennon-group.co.uk
For further information, please contact:
David Dupont - Group Director of Finance 01392 443998
Jo Finely - Investor Relations Manager 01392 443401
James Murgatroyd & Sarah Heald 0207 251 3801
Cautionary statement in respect of forward-looking statements
This Statement contains forward-looking statements relating to the Pennon Group's operations, performance and financial position based on current expectations of, and assumptions and forecasts made by, Pennon Group management. Forward-looking statements are identified by words such as "aim", "anticipate", "believe", "continue", "could", "due", "estimate", "expect", "forecast", "goal", "intend", "may", "plan", "project", "remain", "seek", "should", "target", "will" and related and similar expressions, as well as statements in the future tense. Important risks, uncertainties and other factors that could cause actual results, performance or achievements of Pennon Group to differ materially from any outcomes or results expressed or implied by such forward-looking statements include, among other things, changes in law, regulation or decisions by governmental bodies or regulators; general business and economic conditions in the UK and globally; the availability and cost of finance; poor operating performance or a failure or interruption of the Group's operating systems or the inability to carry out network operations or damage to infrastructure; failure or increased costs of capital projects or acquisitions or joint ventures not achieving predicted revenues or performance; reduced customer base, market reform or increased competition affecting prices or reduced demand for services; need for increased environmental provisioning; increased pension costs; loss of key stakeholder support and prolonged negative media campaigns; reduction in availability of high quality, well motivated, trained and competent people to ensure sustained business development; and information technology and business continuity systems and processes failing. These and other risks are described in greater detail in the 2013 Pennon Group Annual Report which can be viewed online at http://www.pennon-group.co.uk/pennon/uploads/latestresults/Annual-Report-3-July.pdf Such forward looking statements should therefore be construed in light of such risks, uncertainties and other factors and undue reliance should not be placed on them. Nothing in this Statement should be construed as a profit forecast.
Any forward-looking statements are made only as of the date of this Statement and no representation, assurance, guarantee or warranty is given in relation to them including as to their accuracy, completeness, or the basis on which they are made. The Group accepts no obligation publicly to revise or update these forward-looking statements or adjust them as a result of new information or for future events or developments, except to the extent legally required.