02/04/09
Water UK releases the results of its 2009 survey of investors carried out by Indepen Consulting.
Perceptions of regulatory risk at this important point in the 2009 Price Review have increased since the last Water UK survey in 2008.
The main findings include:
• Investors in general still take a positive view of the water sector and its regulatory regime.
• Investors recognise the inherently low risk of the water sector, but do not consider it immune to the challenging financial and economic environment.
• At the start of the year (2009) when key Price Review decisions are to be made, nearly 90% of investors see regulation as a key risk facing the water sector.
• Investors would welcome greater clarity on Ofwat’s approach to the Price Review and on the mechanisms Ofwat would employ if conditions deteriorated significantly after the Price Review.
The survey also shows that since the 2008 Survey, investors’ views on prospects for the cost of finance for the next five years have changed. Reflecting the more difficult market conditions, 90% of investors now believe that Ofwat will set a cost of capital between 4.7 and 5.1 per cent, while a year ago over half thought it would be less than 4.6%.
The survey has been timed to ensure that the results are available to Ofwat and other policy makers to be considered alongside water companies’ Final Business Plans, published 7 April. The interviews, which took place in January and February, were at a time of significant market uncertainty.
Pamela Taylor, Water UK Chief Executive, said:
"These findings reflect the confidence of investors in a sector that has been good for customers and produced steady returns, but also their uncertainties: about PR09 and the turmoil in financial markets.
"Investors need reassurance that, in uncertain times, regulatory decisions will be taken with regard to the sustainability of water services.
"As the Price Review reaches its climax later this year, all stakeholders can play a part in communicating with investors to provide the transparency and predictability that are crucial to maintaining confidence in the sector."
Investor Survey 2009Ends
For more information please contact:
Water UK
Rob Wesley, Policy Adviser
020 7344 1819
Indepen
Matt Parr, Principal Consultant
020 7324 1811
Notes for Editors
1. Water UK represents all UK water and wastewater suppliers at national and European level.
2. Since 2002, the UK water industry has commissioned surveys to obtain up-to-date information on investor sentiment about the water sector. In common with previous surveys, the primary objective is to disseminate investors’ views in a coordinated manner to stakeholders, including government and regulators.
As well as tracking issues identified in previous surveys, the 2009 survey pays particular attention to the impact of recent events in the financial markets on the water sector.
3. The 2009 Survey consisted of 21 in-depth interviews to gain a qualitative understanding of investors’ views towards the sector. These interviews were supported by a questionnaire, which enabled investors’ views to be tracked relative to previous surveys. Interviews took place in January and February 2009. As with the 2008 Survey, Ofwat participated as a member of the Survey Steering Group, together with Water UK and water company representatives.
4. The survey was carried out by Indepen Consulting and led by Matt Parr. The team was supported by Dr Angela Whelan, who has been involved with the Investor Survey project since 2002.
Indepen is a strategy and economics consultancy working with clients facing the challenges of regulation, deregulation, competition and restructuring. It has considerable experience in the water and other utility sectors in the UK, other EU countries, and elsewhere. They have worked for regulators, businesses, investors and other stakeholders. Indepen also undertook the 2005 and 2008 investor surveys. Further information can be found at www.indepen.co.uk
