Water firms hit by Ofwat
SHARES in utility companies dropped yesterday after water regulator Ofwat ordered firms to reduce household bills by four per cent over the next five years, potentially denting profits massively.
Analysts warned that Ofwat’s price limits combined with new requirements on infrastructure spending would see dividends slashed across the sector.
Water firms had hoped to raise prices by at least five per cent next year and use the increases to spend ther cash on infrastructure. Thames Water had hoped to raise prices by 17 per cent.
Thames Water chief executive David Owens said the new restrictions have “almost halved Thames Water’s proposed water mains replacement programme”.
But the measures imposed by the regulator, including an order to invest almost £21bn in the antiquated water network, with £4bn going on improving drinking water, will put extreme pressure on shareholder payouts.
Investors yesterday dumped shares, resulting in United Utilities dropping 4.83 per cent to 479.25p, Severn Trent plunging 7.28 per cent to 1,032p and Northumbrian Water falling to 3.25 per cent to 243.5p.