Pennon acquires Bristol Water

Pennon Group has acquired Bristol Water for £425 million, adding 1.2 million customers to the group.

The owner of South West Water announced the deal, which gives Bristol an enterprise value of £814 million, in an update to the City this morning (3 June).

At the same time, it revealed a £1.5 billion special dividend and that it would buy back £400 million of shares.

The funds for the acquisition and dividend are the result of the sale of Pennon’s waste management business, Viridor, for £4.2 billion last year.

Water only company Bristol is currently 80 per cent owned by Icon Infrastructure, with a 20 per cent stake held by Itochu.

The acquisition price equates to a 44 per cent premium on Bristol’s regulatory capital value (RCV). Pennon said it expected the deal to add c.16 per cent to its own RCV.

Pennon also announced its full-year results this morning, which showed the company to be on-track for 80 per cent of its outcome delivery incentives for the first year of AMP7. Due to missing wastewater performance targets the company is in a net penalty position on ODIs of £8.8 million. It has a pollution incident reduction plan to address this area.

Susan Davy, Pennon group chief executive said: “The acquisition of Bristol Water brings great people and a great business to Pennon and I am hugely excited about building a future together. We see attractive opportunities to continue to invest in the Bristol Water business to deliver enhanced resilience and water security to benefit customers in Bristol and beyond. This latest acquisition, building on a strong heritage and history, firmly cements Pennon as one of the leading UK water and wastewater companies.

“Additionally, we have demonstrated our credentials as a responsible business, reducing debt levels, increasing pension contributions, and further supporting the Green Recovery for the much-needed regeneration of our region.”