Pennon Regulatory News (PNN)

13 August 2014

PENNON GROUP PLC

INTERIM MANAGEMENT STATEMENT

Overall financial performance of Pennon Group since 31 March 2014 remains in line with management expectations.

South West WaterSouth West Water is continuing its strong financial performance with robust operational delivery and high standards of customer service and expects to complete the successful delivery of the K5 (2010-2015) regulatory contract.

2014/15 profits will be impacted by the 2014/15 tariff freeze already announced. However, the revenues foregone are included in the Draft Determination for K6 (2015-2020) on an NPV neutral basis.

Following early receipt of its Draft Determination for the K6 regulatory contract in April this year, South West Water is able to accelerate a number of key projects (eg bathing water improvements) ahead of significant legislative changes. With the company's track record of efficiency and outperformance, South West Water is well placed to deliver its business plan in K6 and will have an opportunity to outperform the assumed returns on equity.

Viridor

Viridor continues its transformation from being predominantly a landfill operator to being one of the country's leading recycling, renewable energy and waste management companies.

As flagged at the Preliminary Results, Viridor's H1 2014/15 EBITDA will be materially lower than in H1 2013/14. However with five Energy Recovery Facilities (ERFs)(1) scheduled to come on stream this year H2 EBITDA is expected to increase significantly and result in 2014/15 full year EBITDA exceeding 2013/14.

Year to date performance has primarily been impacted by the expected continuation of the decline of the landfill business. Also, as expected, landfill gas generation has declined from peak and the recycling business has been moderately affected by near term weakness in recycling prices.

Viridor has been investing to improve the productivity of its assets and quality of its recyclate products. The Rochester plastics plant is expected to come on stream in the next month and the Scottish glass separation plant shortly thereafter. The strategic focus on improving the productivity of recycling assets and recyclate quality is expected to enhance future margins.

The Lakeside ERF joint venture is performing strongly and is ahead of expectations. Other highlights of the ongoing development of the Viridor Energy business include:

· Takeover of Exeter ERF was achieved on 28 July and plant operation is exceeding design parameters

· Ardley ERF commenced burning waste at the end of June and synchronised to the Grid on 25 July

· Runcorn I commenced burning waste in March and is undergoing an extensive commissioning process. Issues arising are being addressed to ensure the long term performance and consequently takeover is now expected to be in Q3/Q4 2014/15. Runcorn II is still expected to be taken over towards the end of Q4 2014/15

· Cardiff ERF is now in cold commissioning and remains on track for takeover in late 2014/early 2015

We believe ERFs are central to the UK's waste and renewable energy strategies as the long-term low-cost alternative to landfill for disposal of residual waste. Since the year end Viridor has secured additional waste inputs for the opening of its ERF plants, and now has c85% of the required waste input for the opening of the committed ERFs.

(1) Previously referred to as Energy from Waste (EfW) facilities.

Group

Since 1 April 2014 Pennon Group Plc has secured/renewed £205m funding comprising:

· £80m term loan

· £75m of Revolving Credit Facilities (RCFs)

· £50m finance lease

The £125m Convertible Bonds due 2014 have all converted resulting in the issuance of 20,908,635 Pennon shares.

The Company intends to announce its Half Year Results for 2014/15 on Friday 28 November 2014.

Further information on Pennon, South West Water and Viridor can be found on the Group's website, www.pennon-group.co.uk

For further information, please contact:

Pennon: David Dupont - Group Director of Finance 01392 443998

Jo Finely - Investor Relations Manager 01392 443401

RLM Finsbury: Sarah Heald 0207 251 3801