Fitch Ratings has this morning confirmed that it views the outcome of the Anglian Water and Yorkshire Water appeals to the Competition and Markets Authority (CMA) as credit-positive and that the ratings remain unchanged.
The ratings agency was commenting on the publication yesterday of the final re-determinations (FRD) by the CMA for in the appeals by four UK water companies against Ofwat’s Final Determinations in the 2019 Price Review on their AMP7 Business Plans.
Fitch now expects expect the forecast FY25 (financial year ending 31 March 2025) total senior gearing to reduce by about 1 pp for both companies, and for the forecast average senior cash Post Maintenance Interest Coverage Ratios to increase by around 0.1x as a result of CMA's decisions.
Fitch said the improvements strengthen the companies' position at the existing rating levels and provide greater headroom for adverse developments, such as extreme weather events, operational underperformance or prolonged low rates of inflation. However, the ratings agency added that it did not expect that the CMA’s FRD alone would lead to rating changes, as the companies were “previously weakly positioned within their rating levels.”
The CMA's re-determination has delivered a number of improvements from Ofwat's Final Determinations - the announced changes will increase both companies’ revenue allowances in FY23-FY25.
Totex allowances also increased by £108 million (2.1%) for Anglian Water and £158 million (3.9%) for Yorkshire Water respectively.
Most of the improvement (66% for AWS and 77% for YWS) comes from higher allowed base costs, which reduces the probability of totex overspend and is credit-positive.
Fitch said that more symmetrical sharing rates, with both companies bearing 55% of the cost of any overspend and receiving 45% of the benefit of any underspend, would also soften the potential impact of a totex overspend on the company's financial profiles.
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As a project manager at Metasphere, a Grundfos-owned remote telemetry company at the cutting edge of innovation, Fey McHarg, has witnessed firsthand how the intelligent harnessing of data, specifically through the data-as-a-service model, is fundamentally reshaping and revolutionising the water sector.
Attendees at next month’s National Civils Show, Floodex, National Drainage Show and Waterways Management on 26th and 27th November are set to benefit from an expert speaker line-up and the opportunity to visit a wide range of exhibitors all co-located in one place at Excel, London, one of the UK’s leading international exhibition and convention centres.
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Find out more about the remarkable career opportunities on offer at WSP - scroll down to watch the inspirational video.