Pennon to take hit on costs of legal dispute with Interserve

Pennon said the final price rise was dependent on the outcome of litigation with Interserve after it handed the outsourcer its marching orders in 2016 after delays on the project, which is run by its Viridor unit.

“Viridor is contractually entitled to recover incremental costs from the original principal contractor, Interserve, under certain circumstances,” Pennon said.

“Discussions with Interserve are ongoing with regard to the contractual settlement. Dependent upon the conclusion of those discussions, margins over the life of the project to 2043 could potentially be lower than originally expected, although we do not believe there is any immediate impact on earnings.”

Pennon added that Viridor was focused on mitigating the impacts of China's changes in recyclate import regulations, but expected lower second half earnings “although this is not expected to have a material impact on Pennon's overall financial performance”.

Elsewhere, Pennon said South West Water continued to perform well and in the third quarter, delivered a sector-leading customer experience quality score.

“Overall performance as measured through the Return on Regulated Equity (RORE) is anticipated to continue at the sector-leading cumulative rate of 11.8%,” it added.