Pennon Group in line to meet expectations for 2017

Water utility and waste management company Pennon Group said it was in line to meet expectations for the 2017 financial year as its portfolio of energy recovery facilities remains on track.

In a trading statement for the six months ended 30 September, the FTSE 250 company said its energy recovery facilities aims to reach the earnings before interest, depreciation and amortisation (EBITDA) target of about £100m due to a ramp up in Peterborough and availability increases at Trident Park in Cardiff and Runcorn II in Manchester.

South West Water, the company’s subsidiary which supplies water and sewage services in Cornwall, Devon and parts of Dorset and Somerset, experienced higher customer demand in the first half of the year and is expected to make savings from efficiency initiatives.

The water business is on track to outperform the 11.7% rise on return on regulated equity achieved for the previous year.

Eight energy recovery facilities at recycling, renewable energy and waste management business Viridor are “performing well” and a further three are under construction.

The recycling and renewable energy centre in Glasgow is receiving waste in the initial commissioning stage and remains on track, as Viridor works with the contractor to finish construction as soon as possible.

Landfill volumes declined as expected as Viridor closed two landfill sites leaving 13 open sites as part of the strategy to reduce the number of open sites by 2020, and landfill power generation is performing in-line with expectations due to low prices.

The company plans to reduce costs which included about £27m of net synergies by 2020 from the integration of South West Water and Bournemouth Water and about £11m a year from 2018 as additional total expenditure outperforms.

Capital expenditure is expected to be higher than last year due to South West Water's investment in the Mayflower water treatment works in north Plymouth, waste water improvements and investment in the energy recovery facilities portfolio.

Chief executive Chris Loughlin, said: "Pennon has made a good start to 2016/17 delivering a strong performance across both water and waste.

“South West Water continues to significantly outperform its regulatory contract and we anticipate achieving a sector-leading return on regulated equity again this year. Our shared services review, which will result in cost savings, supports our strategy of working more closely as a group. With this clear strategy and our strong balance sheet, Pennon is well-placed to continue to deliver for customers, communities and shareholders."

Shares in Pennon were up almost 1% to 897.5p after 10 minutes of trading on Tuesday.