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The year appears to be ending just as it began – with water sector finances back in the spotlight. This time around the salvo comes not from environment secretary Michael Gove about businesses with “opaque financial structures”, but the pensions regulator, which rapped Southern Water for prioritising shareholder dividends over payments into the company’s pension pot – despite the scheme’s multimillion-pound deficit.
As one industry observer in our analysis on p6 points out, it’s not a good look.
As a result of the intervention, Southern will now pump £223.5 million into its scheme over 12 years to clear the shortfall quicker, compared with £170.5 million under its old plan.
Publicly, the company has responded well, also introducing a sharing mechanism with the scheme, to kick in if dividends exceed a certain level.
Privately, it will feel like another stark reminder that water businesses and their financial models remain very much in the sights of regulators – and policymakers.
With some tough feedback expected on PR19 business plans due in the new year, and the political mood music around renationalisation ever present, the end of the year hasn’t delivered the gladdest of tidings for water company executives.
And things don’t look any easier for the year ahead.
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