Fitch Ratings has upgraded the senior secured debt rating of Southern Water Finance Plc - the financing company of Southern Water - to 'BBB' from 'BBB-' - the Outlook is Stable.
The ratings agency said the upgrade reflects sustained equity support from funds managed by Macquarie Asset Management, now joined by Asterion Industrial Partners, which holds a 20% stake. Southern Water has made public its shareholders' intent to inject further equity to reach 65% reported net debt/regulated capital value (RCV) by the end of AMP8 in March 2030).
“This support comes amid an ongoing operational turnaround that is beginning to yield results, as evidenced by improved outcome delivery incentives (ODIs) and environmental performance, and is complemented by a favourable Competition Markets Authority (CMA) appeal outcome,” Fitch commented.
The upgrade follows the announcement of the shareholders' intent to continue to support the water company through fresh equity injections, aiming to reduce reported gearing to 65% by the end of AMP8 in March 2030. According to Fitch, the £1.2 billion of equity committed to date demonstrates ongoing shareholder support. The ratings agency is forecasting that a further £400 million of fresh equity over FY28-FY30 (financial year ending March) will be required to meet the public target.
Failure by the company to remain below 73% net debt/RCV, either by way of shareholder support or operational performance, would result in a downgrade.
Fitch says that sector risk remains, with business risk in AMP8 remaining “moderately higher” than in previous price controls, due to heightened environmental risk, increasing public scrutiny and higher clawback risk, which is linked to the price control deliverables mechanism.
“The water sector is at a critical turning point. The Cunliffe Review recommendations, Water White Paper, and a forthcoming transition plan, expected in 2H26, add considerable uncertainty. The regulatory environment remains the most important building block in our analysis for determining sector debt capacity at a given rating,” Fitch comments.
Commenting on fines treated as unfunded capex, Fitch points out that in FY26, the water company was ordered by Ofwat to undertake £13.5 million in self-funded network improvements mostly to sewer level monitoring and wetland restoration. While Fitch views such capex as unavailable for debt service, it points out that it views “this mandatory investment in the network as more beneficial to the business over the long term than a pure cash fine.”
Albion Water, the first NAV (New Appointment & Variation) to have been established in1999 and now under the ownership of SDS Water Group, has appointed Andy Holland as its new Director of Business Development.
UK water companies are invited to join an upcoming webinar which will explore how the sector can take indirect potable reuse (IPR) from concept to full-scale operational reality.
James Sumsion, CEO of predictive water intelligence specialists Kohtari, says the water sector needs to take a giant leap forward, so that it can anticipate and act upon water quality issues - rather than merely react.
Ray Moulds, Sales Director at Flood Control International, takes a look at how automated sliding floodgates are supporting secondary containment at water and sewerage company sites.
Hear how Scottish Water has completed its £235 million Ayrshire Glasgow Resilience Project - customers across Greater Glasgow, Ayrshire and East Renfrewshire will now benefit from a more secure and resilient water supply.
Hear how United Utilities is accelerating its investment to reduce spills from storm overflows across the Northwest.
Find out more about the remarkable career opportunities on offer at WSP - scroll down to watch the inspirational video.