Ofwat fast-tracks plans from United Utilities, Severn Trent, Pennon

In its initial assessment on the PR19 business plans submitted in September, regulator Ofwat said on Thursday that the three companies had submitted plans "that set a new standard for the sector" and so had been given the green light to start delivering the plans for customers.

Ofwat will publish draft determinations for fast track companies in April 2019, using the existing cost of capital from its December 2017 publication.

Fast track status grants these companies an additional 10 basis points to return on regulated equity and the three companies will benefit from early draft determinations on 11 April, while those who did not qualify will have to wait until July. Ofwat's final determinations are due to be published on 11 December.

Shares in all three companies were higher in early trading on Thursday.

In terms of valuation, analysts at RBC Capital Markets estimated that fast track status is worth around 0.2% to Pennon, roughly 0.4% to both United and Severn, adding that "we believe there will also be additional upside from positive sentiment given the potential look through to outperformance across AMP7".

RBC said United "probably the biggest beneficiary" as analysts believe the market expected Severn and Pennon were more likely to gain fast track status, while the positive news "may alleviate some market concerns" over UU's balance sheet.