Fitch Ratings has today affirmed Wessex Water's senior unsecured rating at A, saying it reflects WWSL's market-leading operational and regulatory performance and describing it as 'clearly the market leading company in the sector'.
The ratings agency has also affirmed the utility’s long-term Issuer Default Rating (IDR) at 'BBB+', and short-term IDR at 'F2'.
Fitch said that in addition to reflecting WWSL's operational and regulatory performance, the affirmation also reflects the negative impact from the material reduction of earnings expected for the upcoming AMP6 regulatory period from April 2015 to March 2020.
Fitch said its forecast financial ratios will remain within guidance for the rating, given the company's track record of outperforming the regulator's cost targets and the low cash cost of its embedded debt.
'Overall, WWSL is clearly the market leading company in the sector'
Fitch assumed for the rating forecast that Wessex Water will earn the cost of capital of 3.85%, achieve at least 5% outperformance relating to pay as you go expenditure (excluding infrastructure renewal) and receive revenue adjustments from the last price control of £44.7m as declared in its revised business plan submission (ie capital incentive scheme, opex roller, revenue correction mechanism and service incentive mechanism (SIM). The agency has also considered that the company may have to pay pension deficit repair in excess of regulatory allowances.
In FY14 WWSL achieved a SIM score of 87, ranking joint-first with Anglian Water according to preliminary data. The company maintained stable asset serviceability for all asset categories, met leakage targets and reduced the number of repeat flooding incidents. Only the number of serious pollution incidents exceeded the target during the year following exceptional rainfall and management is making every effort to restore previous performance levels. Fitch commented:
“Overall, WWSL is clearly the market leading company in the sector.”
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