United Utilities Regulatory News (UU.)

28 Jan 2009 07:00

United Utilities Group PLC

28 January 2009

UNITED UTILITIES INTERIM MANAGEMENT STATEMENT

United Utilities today issues a trading update for the period from 1 October 2008 to 27 January 2009. Current trading is in line with the group's expectations.

The regulated water business continues to invest significant sums in improving the company's infrastructure to provide essential services for customers. Regulated revenue for the year ending 31 March 2009 is expected to grow at a similar rate to that outlined in the group's 2008/09 half year results published on 26 November 2008. United Utilities' balance sheet remains robust and its asset base is growing in line with management's expectations as the company progresses through the peak phase of its substantial regulated capital investment programmes.

The company's business improvement initiatives are progressing well and United Utilities Water remains broadly on track to deliver its regulatory efficiency targets across the 2005-10 period, although it continues to face increasing cost pressures in areas such as power and bad debts.

The group continues to benefit from a robust financing position and has headroom to cover its projected financing needs until 2011. During the period, United Utilities Water PLC (A3, stable; A-, stable) drew down a 12 year, £400 million loan from the European Investment Bank. In addition, United Utilities Water PLC issued a 6.125%, 7-year bond: £250 million in December 2008 and a further £50 million in January 2009. The Board continues to target an investment grade credit rating of A3 for United Utilities Water PLC, which it believes best mirrors regulatory assumptions and is an appropriate investment grade rating to allow the company to raise finance to fund its substantial capital investment programmes.

On 26 November 2008, the Board declared an interim dividend of 10.64 pence per ordinary share, in respect of the six months ended 30 September 2008, in line with the group's dividend policy.

In December 2008, United Utilities was selected as preferred bidder for a substantial municipal solid waste treatment contract in Derbyshire, via a joint venture with Interserve*. This was confirmed by Derbyshire County Council and Derby City Council on 13 January 2009. The contract is due to commence in April 2010 with an expected duration of 27 years and will include the design, build and operation of a new waste treatment facility. This represents United Utilities' first step into the municipal solid waste treatment sector, enabling the group to utilise its core skills in a new market with significant growth potential.

Regulatory developments

As part of the 2009 water price review process, on 19 December 2008, Ofwat published its initial draft baseline position for the 2010-15 period under the capital expenditure incentive scheme**. This initial draft baseline represents the first stage of Ofwat's capital expenditure assessment, with a further draft baseline and final baseline still to be developed. It assumes a lower number of projects and outputs and a reduced scope of capital maintenance activity, compared with the proposals included in United Utilities' draft business plan. In addition, the initial draft baseline does not take account of further potential projects which, as outlined previously, United Utilities is likely to include in its final business plan in April 2009. These areas will continue to form part of the ongoing discussions with the company's regulators.

United Utilities is currently reviewing this initial draft baseline position as part of the overall price review process. The company intends to propose a level of capital expenditure in its final business plan in April 2009 which it believes represents an appropriate balance to safeguard existing standards of service, address new, higher quality standards and make provision for the challenge of climate change, whilst maintaining the affordability of customer bills.

Outlook

Looking ahead, management is confident of delivering a good underlying financial performance for the year ending 31 March 2009.

In line with its usual practice, United Utilities intends to issue a pre-close trading update on 26 March 2009.

United Utilities' contacts

For further information please contact:

Philip Green, Chief Executive +44 (0) 1925 237000 Tim Weller, Chief Financial Officer +44 (0) 1925 237000 Gaynor Kenyon, Communications Director +44 (0) 7753 622282 Darren Jameson, Head of Investor Relations +44 (0) 1925 237033

Dominic Fry / Tom Murray, Tulchan Communications +44 (0) 20 7353 4200

Notes

* Interserve is a services, maintenance and building group operating in the public and private sectors in the UK and internationally.

** Further information on the capital expenditure incentive scheme (also referred to as `menu regulation') is available in Ofwat's "Setting price limits for 2010-15: Framework and approach - a consultation paper".