Investing.com -- Shares in Pennon Group recovered some ground Thursday, a day after plunging more than 20% when the British water utility announced a roughly £550 million rights issue and a dividend cut. The announcements came as its new chief executive launched an operational overhaul and stepped up investment.
The stock was up 1.5% in London trading by 08:25 GMT.
The fully underwritten rights issue, launched Wednesday, will help fund about £1 billion of additional investment in Pennon's regulated water businesses. Capital spending in those businesses over the AMP8 regulatory period is now expected to reach about £3.6 billion, roughly £1 billion above the original plan. Pennon said it still expects to find efficiencies and will reinvest them. Full terms are in a separate announcement and an offering circular.
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Pennon will cut its total dividend for 2026/27 to about £125 million from £138 million, with the lower payout applying to both the interim and final dividends. After accounting for the cut and the new shares, the company put the implied underlying reduction in dividend per share at about 30%, leaving an expected payout of around 18 pence per share. It said it will grow the dividend per share in line with CPIH from that lower base.
Some of the extra spending can be recognized through growth in regulatory capital value, a measure of a water company's capital base, under Ofwat's cost change process. In a draft decision on the 2026 round, the regulator provisionally allowed £230 million, or 76% of what Pennon requested. A final decision is due by Dec. 15 at the latest.
Pennon expects about £170 million of further investment through the 2027 and 2028 rounds, subject to approval, and is targeting £400 million in total additional capital value from cost changes.
Pennon also plans to sell Pennon Power, putting about £25 million of the proceeds into "behind the meter" renewable generation at its operational sites and using the rest to reduce group debt. It is targeting debt in its regulated water businesses of no more than 65% of regulatory capital value throughout AMP8, within its long-term policy range of 55%-65%. Group debt on the same measure is expected to run a few percentage points higher but is unlikely to exceed about 70%.
Original Article
Pennon claws back some losses after 20% plunge on rights issue, reduced dividend
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