Southern, Portsmouth and SES Water being 'closely monitored' by Ofwat over financial resilience

Multiple water suppliers in the South East of England are being 'closely monitored' by the water regulator, Ofwat, due to concerns over their financial resilience.

It comes as several reports suggested fears about Thames Water’s finances had now broadened to other firms in the industry.

The worries over the health of water companies was highlighted in Ofwat's latest report, which was published at the end of last year.

Southern, SES and Portsmouth Water have been told improvements are needed as a priority, to ensure their finances are sustainable long-term. Thames Water was also noted as a concern.

All four companies were told action is required and the regulator has since been actively engaging with them.

The report highlights the individual issues facing the region's water companies, with Ofwat identifying key areas that could impact finances.

The regulator warned that Portsmouth Water's finances could be negatively affected by the Havant Thicket reservoir, saying: "Given the potential for such a significant project to impact on financial resilience, we have additional monitoring and company engagement in place."

It's concerns around SES Water, which supplies customers in parts of Kent, Surrey and Sussex related to a 'weakening trend' across key financial metrics. Ofwat was also concerned about its lower credit rating.

SES has implemented new systems, the regulator said, but the changes were 'not reflected' in its 2021-22 financial statements.

Southern and Thames Water were both warned of the need to demonstrate delivery of their individual turnaround plans - which focus on improving performance and finances at the companies.

The regulator warned back in December that despite Thames' shareholders pumping in £500 million of equity, this could not be enough.

It also recognised a £530 million sum that was given to Southern Water by its shareholders, but continues to monitor its progress.

Despite the intervention by Ofwat in December, there are still fears in Government that more water companies could struggle to stay afloat.

The Times cited a Whitehall source as saying: “A lot of these companies are highly geared and struggling.

“There is a worst case scenario where other companies end up in the same place as Thames Water.”

In a statement on Wednesday evening, Ofwat said it has been “clear that Thames Water has significant issues to address” and that it needed to “improve their financial resilience”.

But the watchdog said the water sector remained an attractive investment opportunity.

A spokesman said: “Ofwat will continue to keep companies’ financial resilience under close scrutiny and work with companies to ensure they take action to ensure that they have the financial backing to deliver for customers and the environment.”

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