Interim Management Statement
14 February 2013
Overall trading performance of Pennon Group remains on track to meet management expectations and is in line with market consensus.
South West Water
South West Water is continuing its strong performance against the 2010-2015 regulatory contract and is well placed to outperform its assumptions. The company continues to deliver robust operational performance and high standards of customer service, notwithstanding the extreme flooding experienced in recent months.
On 17 January the company announced that it had agreed to accept the Ofwat Section 13 Notice issued on 21 December 2012 setting out proposed changes to its Licence as a water and sewerage undertaker. These Licence proposals were prepared as a result of extensive constructive discussions between Ofwat and water companies following the previous Section 13 Notice issued in October 2012. South West Water welcomed the significant changes which have been made to the previous proposals.
As previously flagged, trading in Viridor has been significantly below the level of last year with recyclate prices falling back from their 2011 peak reflecting world economic and market conditions. Recyclate revenues per tonne have recovered a little from their lows of October and November 2012 but remain significantly below first half 2012/13 levels and we remain cautious about the prospects for further recovery. Viridor is continuing to respond aggressively to the ongoing near-term challenges. With the weakness in recyclate prices and the continuing reduction in landfill volumes we expect PBIT plus joint ventures in 2013/14 to be broadly similar to the current year. As a result of these factors we are reviewing the carrying values of some of Viridor’s assets and environmental provisions (any impairment or additional charges would be non-cash items) and we will update the market in our preliminary results announcement.
Our Energy from Waste projects are expected to deliver significant growth from 2014/15 onwards. We have made further strong progress since the beginning of the year in developing our project pipeline. In particular:
- financial close achieved for the Glasgow Design Build Finance Operate project (July 2012) and planning application for the Recycling and Renewable Energy Centre, which is part of the project, approved (January 2013)
- financial close achieved for the South London Waste Partnership PPP (November 2012)
- planning approval (January 2013) and financial close (February 2013) achieved for the Peterborough PPP
- provisional preferred bidder achieved for the South East Wales residual waste project (Prosiect Gwrydd) (February 2013)
Since 1 October 2012 Pennon Group Plc has:
- renewed £209m of Revolving Credit Facilities (RCFs) and term loans
- put in place £63m of new term loans and RCFs
- drawn down a £40m finance lease
A conference call will be held this morning (Thursday 14 February) at 9:00am.
Dial in details are as follows:
Telephone number: +44 (0) 20 3003 2666
The Company intends to announce its Preliminary Results for 2012/13 on Thursday 23 May 2013.
Further information on Pennon, South West Water and Viridor can be found on the Group's website, www.pennon-group.co.uk
Cautionary statement in respect of forward-looking statements
This Statement contains forward-looking statements relating to Pennon Group’s operations, performance and financial position based on current expectations of, and assumptions and forecasts made by, Pennon Group management. Words such as "aim", "anticipate”, “believe”, “continue”, "could", “due”, “estimate”, "expect", “goal”, "intend", “may”, "plan", “project”, “remain”, “seek”, “should”, "target", “will” and related and similar expressions as well as statements in the future tense identify forward-looking statements. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will or will not occur in the future. Various known and unknown risks, uncertainties and other factors could lead to substantial differences between the actual future results, financial situation, development or performance of the Group and those expressed or implied in this statement. These risks, uncertainties and factors include, but are not limited to, changes in the economies and markets in which Pennon Group operates; changes in the regulatory and competition frameworks in which Pennon Group operates; the impact of legal or other proceedings against or which affect Pennon Group; and changes in interest and exchange rates. Further details of Pennon Group’s principal risks and uncertainties are set out in Pennon Group’s 2012 Annual Report which can be viewed online at http://www.pennonannualreport2012.co.uk/ Undue reliance should not be placed on forward-looking statements which are made only as of the date of this Statement. Nothing in this Statement should be construed as a profit forecast. The Group accepts no obligation publicly to revise or update these forward-looking statements or adjust them as a result of new information or for future events or developments, except to the extent legally required.