Pennon Regulatory News (PNN)

PENNON GROUP PLC

11 November 2022

South West Water to launch pioneering customer incentive scheme to help reservoir levels recover in Cornwall

South West Water is today announcing a first of its kind customer incentive scheme, asking everyone in Cornwall to come together to help recharge reservoir levels, as part of building longer term resilience.

"Stop the Drop" will see customers offered a financial incentive to encourage them to reduce consumption in exchange for a rebate on their bill. If Colliford reservoir recovers to 30% by 31 December 2022, customers in Cornwall will receive a £30 rebate on their bill.

2022 has seen the lowest level of rainfall in the South West for 130 years, which has been combined with a very hot summer and elevated customer demand. Whilst the majority of South West Water's customers have remained unaffected during this period, significant pressure has been placed on water resources in parts of the region, with river flows and reservoir levels in Cornwall reaching historically low levels this summer.

If Colliford reservoir recovers to 30% capacity by 31 December 2022, the payment of the financial incentive to customers would result in a reduction to (non-underlying) revenue of c.£10 million in H2 2022/23. In addition, we would also anticipate lower customer demand which would be reflected in underlying revenue as customer behaviour changes.

Investing in resilience

South West Water is also accelerating initiatives of up to £20 million to help secure supplies. This includes investment in Hawkstor reservoir, purchased earlier in 2022 and work at three other water sources in Cornwall. Alongside providing over 45,000 water saving devices to customers, South West Water will continue with targeted operational activities such as customer side leak repairs. The new capital investments will be reflected in South West Water's regulatory capital value.

The Group is also pursuing longer-term investments to secure future supplies, including the new Cheddar 2 reservoir in the Bristol region which will be included in South West Water's forthcoming Water Resources Management Plan.

As part of South West Water's Green Recovery investment to 2025, over £27 million will be invested in the water grid, improving our ability to move water throughout the region to where it is needed the most.

Half Year Results 2022/23

Pennon will report half year results on 30 November 2022. The Group anticipates minimal impact on Pennon's half year 2022/23 results as a result of these initiatives, with the income impact expected to be reflected in second half performance and the full year 2022/23 results.

A presentation of the half year results hosted by Susan Davy, Group Chief Executive and Paul Boote, Group Chief Financial Officer, will be available at 08:30am (GMT) on 30 November 2022, followed by a live Q&A conference call.

Further details will be available on the Pennon Group website www.pennon-group.co.uk/investor-information

For further information, please contact:

Additional information

Pennon Group

Pennon Group is the parent company of South West Water (incorporating Bournemouth Water following acquisition in 2015), Bristol Water and Pennon Water Services.

Through its water business subsidiaries, it provides over 870 million litres of clean, safe, and reliable drinking water every day to a population of 3.5 million, swelling to over 10 million in peak summer periods. 

South West Water

South West Water provides services to customers across Cornwall, Devon, the Isles of Scilly, and parts of Somerset, Dorset, Hampshire and Wiltshire.

Over 90% of South West Water's supply comes from surface water sources - such as rivers and reservoirs, with the remainder coming from groundwater sources, such as springs, wells and boreholes. 

In 2021, South West Water launched a £75,000 a year Water-Saving Community Fund, which supports community groups and registered non-profit organisations who can provide a benefit to the community by saving tap water and demonstrating a reduction in water use. Last year, South West Water funded 22 projects which contributed to a combined estimated yearly saving of 59 million litres of water.

Supplies in the majority of Devon, and the Isles of Scilly, and the Bournemouth Water region remain unaffected at this time.

Bristol Water

Bristol Water was acquired by Pennon in June 2021, with clearance granted by the Competition and Markets Authority in March 2022 for the merger with South West Water.

Bristol Water operates a reservoir in Cheddar, known as Cheddar 1, which was built in 1937. In June 2014 the company secured planning permission for a new reservoir, Cheddar 2, alongside the existing reservoir. Cheddar 2 would be supplied by surplus winter flows in the Cheddar Yeo river. In 2018, the Company's previous owners determined the reservoir was not required, the planning permission lapsed. Pennon Group now intends to re-apply for this permission after discussions with Government.

Supplies in the Bristol Water region remain unaffected at this time.