Pennon Group has released an upbeat trading statement for the year ending 31 March 2024 – although the owners of South West Water, Bristol Water, Bournemouth Water and SES Water has acknowledged that it has had to reprofile its target of achieving overall 4 star EPA status from 2024 to 2025.

The trading update says that financial performance for the full year 2023/24, which includes c.2.5 months contribution from Sutton and East Surrey (SES) Water, remains in line with management expectations. Following the successful acquisition of SES Water in January 2024, the customary Competition and Markets Authority (CMA) review process is now underway, with potential for clearance at phase 1 in summer 2024.

The Group said it is well positioned with liquidity for the current AMP7 2020-25 regulatory period, with over £700 million funding secured through Pennon's Sustainable Financing Framework (SFF) since March 2023. New debt will be raised through the SFF through access to public and private markets, whilst maintaining the Group's diverse portfolio of debt. Pennon is also reporting record levels of AMP7 water and wastewater investment and an expectation of c.£850 million capex to 2025.

• The update flags up a range of operational highlights, including:
• Four renewable energy generation sites acquired, with Dunfermline solar construction commenced
• 90% strategic reservoir capacity achieved ahead of 1 April 2024 target
• 50% increase in rainfall over the long-term average has impacted headline levels for storm overflows and wastewater pollutions
• 78 interventions at storm overflow sites underway to improve water quality at 49 of 151 beaches through our WaterFit programme to 2025
• over £95 million customer support unlocked to date
• new AMP8 capital delivery partners mobilised on over 1,000 schemes

Investment in water resource diversification delivering results and long-term resilience

Pennon said 100% of the programme of work to diversify the Group's portfolio of water resources in Devon is now complete, with 70% of the programme of work in Cornwall also complete. This has contributed to the early achievement of 90% storage for strategic reservoirs in the region.

Construction work at Blackpool Pit is now complete which brings the utility’s portfolio of repurposed quarries to four. Blackpool Pit, along with Stannon, Park and Hawks Tor, will have all been used this year to support an improvement in water resources in Cornwall. In Devon, winter pump storage work at Gatherley is also now operational, and along with the Lyd pumping scheme delivered last year, both new schemes have been used this year to support improvement in water resources in Devon.

In addition to these, the desalination plant in South Cornwall is on track to be operational in 2024/25 and the Porth Rialton water abstraction and treatment scheme will be operational under its winter licence in 2024/25.

The updates states:

“With these projects we are improving the long-term resilience of the region following a year-long drought. We are on track to reach our target of a 45% increase in Cornwall water resources by 2025, having already achieved our targeted 30% increase in Devon water resources one year ahead of schedule.”

Waste water operational performance impacted by challenging weather conditions

Pennon is however reporting thats its waste water operational performance impacted by challenging weather conditions. Annual rainfall in the South West has increased by 50% in the second half of the year, when compared to long term averages, in addition to the 10 named storms since September 2023 and 12 yellow weather warnings for rain in the region.

The significantly increased wastewater flows have impacted the Group’s headline performance for wastewater pollutions and use of storm overflows. For 2024, whilst six of the seven EPA metrics are tracking positively towards 4 star equivalent performance, current operating conditions have meant the benefits of Pennon’s Pollution Incident Reduction Plan (PIRP) will not be seen until 2025. As such overall 4 star EPA status is now reprofiled for 2025.

Nonetheless, Pennon said it continues to make sustainable progress on delivering environmental improvements across the region, with 78 interventions underway to improve 49 of 151 beaches through its WaterFit programme by 2025. The company is anticipating retaining 2 star EPA status for 2023, assuming Environment Agency confirmation of its improved water resource position.

Commenting on progress to Net Zero, the update says that as planned, a total of four renewable energy generation sites have been acquired at a cost of c.£40 million. Construction has commenced at one of the four sites, Dunfermline, where 39 GWh generation is anticipated annually, alongside 60 MWh battery storage, with grid connection in expected in late 2024.