Investors do not feel listened to by Ofwat

Water sector investors do not feel listened to by Ofwat according to its annual survey of investors, which nevertheless showed overall support for the regulator’s policies and methods.

The poll found 48 per cent of respondents did not feel listened to by Ofwat, compared to 38 per cent who did and 15 per cent who were undecided.

The survey, which was conducted in November, asked participants to agree or disagree with the following statements:

• Ofwat’s regulatory framework aligns the interests of regulated companies and their investors with those of customers over the long term.
• Ofwat regulates in a proportionate, consistent, transparent and targeted way, choosing the most appropriate tools from within a wide range of regulatory responses.
• Ofwat is independent of government(s).
• Ofwat’s policies are well-considered and consistent.
• Ofwat is listening to investors.
• Ofwat engages with the investor and credit-rating communities in an open and transparent way.
• Ofwat engages consistently and sufficiently with all types of investment stakeholder (equity, debt and analysts).

Of the 61 respondents (from a distribution list of 462 investors), 77 per cent were equity investors, who had a higher weight in the survey, 13 per cent were debt investors and 10 per cent were advisers.

For six of the seven statements, more respondents agreed than disagreed. However, the overall scores for 2020 were lower than in all years since 2016.

The proportion of respondents in agreement were also lower than in the previous survey for all statements except “Ofwat is independent of government(s)”. The percentage of investors that feel listened by Ofwat has fallen steadily over the last four years.

Views were divided on whether the regulatory framework aligns the interests of companies, investors and customers, with 43 per cent agreeing, 34 per cent disagreeing and 23 per cent being undecided.

With regards to Ofwat’s independence from government, 42 per cent agreed that it was, 30 per cent disagreed and 28 per cent were undecided.

The survey found 64 per cent of investors felt Ofwat engages with the investor and credit-rating communities in a transparent open way. The same proportion believed the regulator engages consistently and sufficiently with all types of investment stakeholder.

Qualitative feedback from the survey showed support for Ofwat’s engagement through emails, briefings and one-to-ones, and in particular it’s communications relating to PR19 and Covid-19.

However, investors said they would also like better access to information, the Ofwat senior leadership team and those working on resilience. They said the regulator should listen more to investors and have a more open mind when doing so.

Ofwat said in response: “As well as seeking the views of the investor community on a number of key consultations and discussion documents, we want to ensure that we have open conversations with investors in both one-to-one and group settings going forward.

“We are always open to hearing of new ways to engage with investors, and will build them into our engagement plans as we look to achieve the best outcomes possible for customers and the environment.”