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Pennon said on Friday that its chairman Ken Harvey will retire from his role at the end of July, reigniting investor expectation that M&A activity could focus on the water and environment giant this year.
Harvey has served as chairman for the past 18 years, but following the company’s AGM this summer he will be replaced by former National Grid chairman John Parker.
The leadership change has already sparked investor speculation that the company may be targeted for M&A activity this year, and follows just one week after Ofwat chairman Jonson Cox fired the starting pistol on a possible industry shake up by setting a five year vision for the sector where vertical integration may no longer be relevant.
Harvey said in a statement that it is “appropriate” for him to step down “at this time when both of Pennon’s subsidiary businesses are well positioned for strong future growth.”
As parent company to South West Water and Viridor, Pennon has no chief executive and rather relies on a chief executive for each business arm and a chief financial officer and chairman to lead the group.
RBC Capital water analyst Maurice Choy in an investor note Friday morning that Harvey has been viewed as the chairman who has strongly kept both parts of South West Water and Viridor together over recent years.
“Viridor has benefitted from being able to access low cost funding at the backs of the stable water assets under South West Water… [But] as Viridor completes its buildout of the [energy recovery facilities] we believe there will be little to justify keeping South West Water and Viridor together in a group,” Choy said.
“With Ofwat now appearing to open up more on consolidation, we believe today’s announcement is likely to raise M&A expectations for Pennon,” he added.
Following Parker’s tenure at National Grid, which ended in 2011, he took a lead position within the Royal Academy of Engineering.
“Having recently completed my term as president of The Royal Academy of Engineering I am pleased to be in a position to devote time and energy to one of the South West’s leading companies,” he said.
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