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Pennon is on track to “meet expectations” in its water and waste businesses despite revealing it will take a £16 million hit following the collapse of infrastructure partner Interserve.
In its trading update, the South West Water owner said it had previously booked in a £8 million write-down but having monitored Interserve’s financial condition the amount has now been doubled.
The company said it is “seeking further clarification” on Interserve’s situation, following its move into pre-pack administration earlier this month.
Pennon’s waste company Viridor, a client of Interserve, has increased the provision on its £72 million claim against the firm after delays to the building of a waste-to-energy plant in Glasgow.
The claim is against Interserve’s construction division, which remained solvent while its parent company Interserve Plc went into administration.
In a statement Pennon said: “We will continue to pursue recovery of all amounts due from the operating subsidiary Interserve Construction Limited and will take all the necessary legal and procedural steps to achieve this.”
Pennon noted that its water business continues to “perform strongly”, with its return on retained earnings expected around 12 per cent, an outperformance.
South West Water’s business plan for PR19 was “fast-tracked” by Ofwat. The company highlighted that despite “unprecedented demand” due to the prolonged dry weather over the summer, operationally its “infrastructure has performed well” with no water restrictions for the 22nd year in a row.
“Momentum is being maintained in respect of achieving both the £300 million target for total expenditure (Totex) outperformance and delivery of further net outcome delivery incentive (ODI) rewards,” Pennon said.
South West Water is the only water company to have achieved fast track for two consecutive price reviews.
Ofwat’s draft determination of South West Water’s business plan is expected on 11 April with final determinations to be published in December 2019.
Pennon is due to publish full year results on 30 May.
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