Water giant Pennon blames rain for poor pollution performance

Pennon Group has flagged a dip in operational performance due to heavy rain and a string of storms across the UK.

A 50 per cent increase in annual rainfall in the South West, coupled with 10 named storms since September 2023, impacted headline performance for the company’s wastewater pollutions and use of storm outflows.

Pennon operates South West Water, Bristol Water and Bournemouth Water.

Between August and February, the UK was hit by at least one storm per month. December brought three, followed by Henk, Isha and Jocelyn in January.

The water utility firm said “significantly increased wastewater flows” had hit operational performance but it still expected to retain its two star rating from the Environment Agency, although it has pushed back its ambition to hit a four star rating from 2024 to 2025.

It is combatting the difficulty with 78 interventions at storm overflow sites, which it said would improve water quality at 49 of 151 nearby beaches.

It comes after a year of up and downs for Pennon. The group swung to a pre-tax loss at the half year mark as high energy prices and hot weather bumped up costs and amid growing scrutiny of the water industry.

Shares are down over 20 per cent in the last 12 months.

Investors were cheered by the the announcement of an £380m acquisition of Sutton and East Surrey Water.

However, that deal is now facing a probe by the UK’s Competition and Markets Authority (CMA), with the watchdog concerned it could “prejudice Ofwat’s ability” to compare water enterprises.

The acquisition came amid mounting concerns over gains at the UK’s privatised water monopolies, which have been accused of dishing out excessive payouts while presiding over severe leakages.

Pennon said today progress in the CMA’s review was continuing “as expected,” with potential for clearance in summer 2024.