Water Firms Finding It Easier To Get Funding: Regulator
Date: 18-Mar-09
Country: UK
Author: Philip Waller
LONDON - British water companies are finding it easier to secure funding for investment, although UK water regulator Ofwat is keeping an eye on financing costs, its Chief Executive, Regina Finn, said on Tuesday. Finn said Ofwat began to see evidence in late 2008 and early 2009 of an easing in companies' ability to raise debt after difficulties caused by the credit crunch.
"There was nothing happening for a while and then in January this year, we saw evidence of water companies being able to raise debt," she told Reuters on the sidelines of a utility industry conference in London.
"We're watching the evidence of what the cost of that (debt) is."
In February this year, Southern Water issued a bond for 300 million pounds ($421.8 million). That was preceded in January by Severn Trent's million pounds bond and Thames Water's 500 million euros ($649.6 million) bond. In December 2008, United Utilities issued a bond for 250 million pounds.
Water companies have urged Ofwat to factor in the debt costs they are facing when it announces its proposed pricing regime for the industry between 2010 and 2015 later this year. Philip Green, CEO of north-west England water company United Utilities, told the Future of Utilities conference earlier on Tuesday the industry was not immune to the economic downturn and was having to reduce investment, although it would do this carefully to minimize its impact.
"It's really important that the cost of capital remains sufficient to attract the level of investment we will need in the industry for several more decades," he said.
"Companies and investors need a clear statement of the regulator's approach to this -- one thing the market doesn't need is uncertainty," he said.
"It's difficult not to be somber in this environment and we would urge Ofwat to take a sensible approach."
Ofwat said the industry has invested about 80 billion pounds since it was privatized about 20 years ago and a further 20 billion pounds is needed during the next five years.
Finn said the cost of capital was "part of a bigger picture" being considered by Ofwat that included the need to ensure value for money for householders facing economic difficulties.
She said the regulator would not reveal its intentions until it publishes draft plans in July.
"We're conscious that the industry needs to invest and to make a return, and that customers can afford to pay their bills," she said.
"I think the consensus is we'll gather information and wait until the last possible minute before making a decision."
(Editing by Andrew Macdonald)