PENNON GROUP PLC
INTERIM MANAGEMENT STATEMENT
Overall trading performance of Pennon Group remains on track to meet management expectations and is in line with market consensus.
South West Water
South West Water is continuing its strong performance against the 2010-2015 regulatory contract and is well placed to outperform its assumptions. The company continues to deliver robust operational performance and high standards of customer service, notwithstanding the extreme flooding experienced in recent months.
On 17 January the company announced that it had agreed to accept the Ofwat Section 13 Notice issued on 21 December 2012 setting out proposed changes to its Licence as a water and sewerage undertaker. These Licence proposals were prepared as a result of extensive constructive discussions between Ofwat and water companies following the previous Section 13 Notice issued in October 2012. South West Water welcomed the significant changes which have been made to the previous proposals.
Viridor
As previously flagged, trading in Viridor has been significantly below the level of last year with recyclate prices falling back from their 2011 peak reflecting world economic and market conditions. Recyclate revenues per tonne have recovered a little from their lows of October and November 2012 but remain significantly below first half 2012/13 levels and we remain cautious about the prospects for further recovery. Viridor is continuing to respond aggressively to the ongoing near-term challenges. With the weakness in recyclate prices and the continuing reduction in landfill volumes we expect PBIT plus joint ventures in 2013/14 to be broadly similar to the current year. As a result of these factors we are reviewing the carrying values of some of Viridor's assets and environmental provisions (any impairment or additional charges would be non-cash items) and we will update the market in our preliminary results announcement.
Our Energy from Waste projects are expected to deliver significant growth from 2014/15 onwards. We have made further strong progress since the beginning of the year in developing our project pipeline. In particular:
financial close achieved for the Glasgow Design Build Finance Operate project (July 2012) and planning application for the Recycling and Renewable Energy Centre, which is part of the project, approved (January 2013)
financial close achieved for the South London Waste Partnership PPP (November 2012)
planning approval (January 2013) and financial close (February 2013) achieved for the Peterborough PPP
provisional preferred bidder achieved for the South East Wales residual waste project (Prosiect Gwrydd) (February 2013)
