The owner of South West Water has announced plans to hand back more than £120 million to shareholders despite facing fresh controversy over water pollution and racking up £9 million in losses.
Emma Powell, Adam Vaughan www.thetimes.co.uk
Less than a week ago, residents of Brixham in Devon were told to boil their drinking water after cases of a diarrhoea-type illness were confirmed and samples of cryptosporidium, a harmful waterborne parasite, were discovered.
Susan Davy, chief executive of Pennon, said that the company was “working tirelessly around the clock” to resolve the problems. Normal service has yet to resume for 15 per cent of affected customers. Households have been offered compensation of a payment or bill credit of £215, which will cost Pennon £3.5 million.
According to the UK Health Security Agency the latest number of reported cases of cryptosporidium infection in the area is 57. Brixham has a population of about 17,000.
The FTSE 100 group declared a final dividend of £86.7 million, which, in addition to the £40.2 million already paid out to shareholders, will take the total dividend for the year to £126.9 million, a move that has prompted criticism.
Anthony Mangnall, the Conservative MP for Totnes, said Pennon should suspend the dividend payments or the chief executive should step aside. “I’m not against dividend payments in general. I’m just saying that at this point in time, where the public have been so badly let down, that we really consider how these dividends are paid,” he told the Press Association.
A government source said it was “completely unacceptable” for the company to be paying a dividend “given its appalling record”, including millions of pounds in fines last year for pollution offences and poor performance.
“The announcement of a £127 million payout only adds to the concerns about the way this company is managed. Steve Barclay [the environment secretary] is clear there is simply no justification for profit from pollution.”
The company said it had adjusted the payout by £2.4 million to account for the fine levied on South West Water last year for dumping waste into rivers in Cornwall and Devon, the largest such penalty imposed for environmental offences in the region.
Davy said the company had “carefully considered” new guidance on dividends from Ofwat, the water industry regulator, in deciding how much cash to return to investors. After the £2 million deduction, the dividend was in line with a policy to increase the payout each year in line with HCPI inflation — the consumer prices index with added housing costs — plus 2 per cent, “signalling we are listening, clearing the way for long-term shareholder value”, Davy said.
She added: “At a time when media, public and regulatory scrutiny is high, it is important we do what is right for all.”
The group underperformed on its outcome delivery incentives, which reward the company for performing against operational targets from leaks and supply interruptions, suffering a net penalty impact of £35 million. Pennon incurred a pre-tax loss of £9.1 million, worsening from £8.5 million the previous year.
The shares closed down 37p, or 5.1 per cent, at 679½p.
Thames directors jump ship
A wave of directors quit Thames Water yesterday ahead of Ofwat’s assessment of the utility’s five-year business plan, due on June 12 (Tom Saunders writes). Six resigned from Kemble Water Holdings, the ultimate parent of Thames, as well as from other entities in the utility’s complex corporate structure, prompting prices for some of the riskiest bonds attached to Kemble to trade as low as 5.8p on the pound, reported Bloomberg, down from 12p a week earlier.
The directors included representatives from Thames Water shareholders such as Omers, USS, QIC, British Columbia Investment Management and Fiera Capital.
East Devon Watch 
In a previous life, one of my jobs was to deal with ‘Emergency Planning’. Emergency planning is a fascinating field and basically comes down to thinking about the nature of an area, what potential hazards exist in it and, if something goes horribly wrong, how best to deal with it.
Having identified the risks, we would then set out plans to deal with them. It was interesting work.
I worked with colleagues in all the emergency services, the military, statutory and other appropriate bodies and local councils etc, to jointly come up with plans to be best able to tackle major incidents at all such places should they ever arise (It was also why I knew, at the time of the Humphries scandal and the claim that confidentiality could, according to certain individuals, stop exchanges of confidential information between councils, was not the case) There were, and always will be, times when the ‘need to know’ has to exist for public safety.
But back to SWW’s problems and their response. I wonder what Emergency Plans may have existed to deal with the cryptosporidium outbreak or worse. I am guessing that there are procedures to identify potential sources of contamination but have grave doubts about any plans to inform the public at large (i.e. those who are not IT savvy as well as those who are) of arrangements, and where necessary, arrange delivery of bottled water. There will be other vulnerable groups who depend upon clean water for medical reasons for example.
I look forward to Devon councils, pressing SWW on the appropriateness of any Emergency Plans. Maybe OFWAT should review their apparent satisfaction with ‘Planning and preparation’ which states:
Quote “Overall, we’ve seen that companies have made efforts to review and update their emergency procedures and plans, taking on board lessons not only from winter, and in some cases from the hot summer too. It’s positive and very important that companies’ senior management teams have been actively involved and owned the plans. This must continue.
Companies have focused on maintaining and improving their infrastructure and systems, and good progress has been made on providing different sources of water (such as bottled water, or bowsers) – ensuring companies have enough available should they need it.”https://www.ofwat.gov.uk/out-in-the-cold-next-steps/planning-and-preparation/
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