Corporate Update: Completion of Equity Raise

SW (Finance) I PLC

19 October 2023

 

19 October 2023

SW (FINANCE) I PLC

SOUTHERN WATER SERVICES LIMITED

CORPORATE UPDATE: COMPLETION OF EQUITY RAISE

·    Funds managed by Macquarie Asset Management have completed their investment of an additional £550 million into the Southern Water Group

Injection of additional £550 million of equity capital

On 11 August 2023, SW (Finance) I plc (the "Company") announced that, to maintain the momentum of its Turnaround Plan[1], shareholders of Southern Water Services Limited ("Southern Water") and its holding companies (the "Southern Water Group") had agreed (subject to satisfaction of market standard conditions) to provide an additional £550 million of equity funding (the "Equity Amount") for the Southern Water Group.

The Company announces that the Equity Amount has today been provided by funds managed by Macquarie Asset Management ("Macquarie") to the Southern Water Group, of which £375 million has been invested as equity into Southern Water with the remaining £175 million invested into its holding companies.

Under the Turnaround Plan, Southern Water will increase capital investment in its network to £3 billion during this regulatory period (2020-25), equivalent to investing £1,500 per household and representing a 50 per cent increase to the capital investment commitment made upon Macquarie's initial investment in late 2021.

Southern Water's new executive team is continuing to deliver on the Turnaround Plan, which is focused on ensuring a reliable supply of water for customers; protecting and improving the health of rivers and seas by building capacity and resilience of our waste-water treatment works and sewer network; making customer service easy and trusted; and becoming an industry-leader in health and safety.

The company is making good progress on the Turnaround Plan:

o  Achieved a two-star Environmental Performance Assessment Rating by the Environment Agency for 2022 (compared to a one-star rating in 2021);

o  Completed the roll-out of c. 24,000 sensors, providing real-time monitoring of its sewer network;

o  Fitted Event Duration Monitors on c. 99 per cent of its storm overflows. Southern Water is on-track to be at 100 per cent in the coming months, further enhancing its already industry-leading transparency;

o  Continued to improve the operational performance and compliance of its pumping stations and treatment works;

o  Maintained water leakage at 17%, compared to the UK industry average of 23%. Part of the Equity Amount is to fund replacement of legacy water mains pipes. Under its business plan submission to Ofwat for the 2025-30 regulatory period, Southern Water has proposed a further step-change in mains replacement, with an associated aim to further reduce water leakage to 13% by 2030;

o  Increased the discount on its social tariff to 45 per cent, reducing the average combined household bill from £439 to £241 for 121,000 vulnerable customers. In a challenging cost-of-living environment, clean drinking water and waste-water treatment services for these vulnerable households has been reduced to 66 pence per day.

Lawrence Gosden, CEO, said:

"We would like to thank Macquarie for its continued support which will enable us to significantly increase capital investment in our network during this regulatory period, manage the impact of cost inflation and higher funding costs on our business, whilst maintaining the momentum of the Turnaround Plan I announced in April 2023.

"The Turnaround Plan will deliver a short, sharp, ambitious performance improvement by 2025. It will also set Southern Water up for the step-change in capital investment planned in the next regulatory period (2025-30). We recently submitted a £7.8 billion investment proposal to our regulator, which includes a record £2.9 billion of investment in the environment.

"As well as protecting the environment, reducing pollution incidents and delivering a detailed plan to reduce the use of storm overflows, this will see Southern Water continue to focus on the critical issues of drought and water scarcity, cutting the amount of water taken from rivers, building new longer-term water sources and helping customers and natural habitats better capture rainwater."

For further information, please contact Stuart Ledger (Group CFO) at:

Address:         Southern House, Yeoman Road, Worthing, BN13 3NX, United Kingdom

Tel:                  01903 272 056

Email:              [e-mail]

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[1] https://www.southernwater.co.uk/media/8235/6579_ofwat_company_turnaround_plan.pdf

 

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