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The Competition and Markets Authority has given the green light to Pennon Group’s acquisition of SES Water.
The parent company of South West, Bournemouth and Bristol water companies bought the holding company of SES Water, Sushimo Osaka Gas Water UK Limited, in January for £89 million.
The deal was approved after Pennon offered assurances that regulatory reporting would remain distinct between the companies. This mirrored the requirements when the company added Bristol Water to its group in 2022.
Pennon Group said it is “pleased that the proposed undertakings in relation to the separate reporting of SES Water’s costs and performance have now been accepted.”
The undertakings included assurances that Pennon will ensure compliance with prevailing price controls and confirmation that regulatory reporting of performance and cost information will be provided to Ofwat for each company as a separate entity.
It agreed to waive the small company premium allowance, which SES had applied for in its PR24 submission.
It confirmed that customers of SES Water would be included in the WaterShare+ scheme run by Pennon and that any merger-specific cost efficiencies would be shared with customers of each of the companies.
The merger had been subject to regulatory approval by the CMA which initially raised concerns that Pennon adding the Surrey based water-only company to its portfolio could impede how Ofwat carries out its statutory functions.
The watchdog said Ofwat’s ability to make comparisons between companies could be hindered and escalated the deal to a secondary review. The CMA accepted Pennon’s undertaking in lieu of referring the deal to a phase two review.
The acquisition is the first Pennon has made that is geographically separate from its west country region.
Davy previously told Utility Week that the company remained open to opportunities in the UK. The group has been acquisitive since the disposal of its waste business Viridor in 2020 for £3.7 billion left Pennon with a war chest of £2.5 billion, which Davy said would be spent expanding within the UK water market.
Following completion of the transaction, Sumisho Osaka Gas Water UK Limited’s name was changed to Sutton and East Surrey Group Holdings Limited.
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