South East Water says it needs cash injections from investors in order to remain in business. It is preparing for an Ofwat major ruling on future spending plans.
The struggling water company, which provides services to 2.3 million customers in Kent, Sussex and Surrey, Hampshire and Berkshire, said that it was “in discussion with lenders and investors regarding additional liquidity”.
The company has yet to reach an agreement on the investment, even though the talks have reached an “advanced stage”.
In a Wednesday results announcement, it stated that “if it was not possible to raise additional liquidity, then the group and thus the company would not be able to have enough liquidity for the continuing concern period.”
The statement added that “the possibility that funding won’t be received is a material uncertain that could cast serious doubts on the group and the company’s ability to continue as an ongoing concern”.
HDF Holdings is the parent company of South East Water. It’s owned by NatWest pension fund.
Thames Water, and other regional monopolies are already listed on the watchlist of regulator Ofwat for companies at financial risk.
On Thursday, the draft Ofwat verdict on the five-year plans of spending and increases in bills for water companies up to 2030 will follow on Friday’s update. This will start six months of negotiation with Ofwat before the regulator makes its final decision in December.
South East Water’s plans call for spending up to £1.9bn on maintaining and updating its infrastructure. These plans would also increase customer bills by 22 percent.
South East Water owners have been searching for funding after providing a £150m to an entity in the utility group at the beginning of this year.
South East Water’s loss before tax for the period ending 31 March was reduced from £74m to £36m, a decrease of £74m. Turnover increased 9% to £281m.
Ofwat is still investigating the incident that occurred in June 2023, when the company did not deliver water for over a week to thousands of its customers. A hefty fine could be imposed by the regulator.
South East Water stated: “Since we launched the investigation, we’ve entered into a transparent and constructive dialogue with Ofwat.
“Our colleagues and contractors, as well as our partners, stakeholders and partners, have all played an important role in keeping the water flowing to as many customers as we could, even in the face of extreme weather conditions that affected our operations and performance overall in 2023/24.
“Despite our efforts, we still had some issues throughout the year. We’d like apologize to any customers who experienced supply interruptions.”
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