28/09/09
Water UK releases the results of its survey of investors' views on the Draft Determinations, carried out by Indepen.
On 23 July 2009, Ofwat published their Draft Determinations of the 2009 Price Review. Through this survey, investors have given their verdict on the draft determinations. The main findings include:
• Views of equity and debt investors on the Determinations differ significantly
• Almost all equity investors had a negative overall view, and they all said it was tougher than they expected, while debt investors had a more mixed view
• Over half of debt and equity investors believed that there was a predetermined outcome for the Draft Determinations of flat prices, which had led Ofwat to be too tough
• Many equity investors doubt whether, looking at the Draft Determinations as a package, companies would be able to earn their cost of capital
• For a large majority of equity investors, the Draft Determinations have made the sector less attractive compared to other investment opportunities
The survey also shows that investors have concerns about whether Ofwat has taken sufficient account of increased risks, the way a new methodology (the Capital Incentive Scheme) has been implemented and a lack of transparency.
The survey has been timed to ensure that the results are available to Ofwat and other policy makers to be considered alongside representations on the Draft Determinations.
Investor Survey: Ofwat's PR09 Draft Determinations (September 2009)
Ofwat's PR09 Draft Determinations: A Review of the Financial Assumptions, report by NERA Economic Consulting
For more information please contact:
Water UK Communication
020 7344 1809 (out of hours 07833 450544)
Indepen
Matt Parr, Principal Consultant
020 7324 1811
Notes
1. Water UK
Water UK represents all UK water and wastewater suppliers at national and European level.
2. Investor survey background and objectives
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.
Ofwat published its PR09 Draft Determinations of price limits on 23 July 2009, and this Draft Determination Investor Survey focuses on investors’ views on these Draft Determinations. Ofwat will publish their Final Determinations on 26 November 2009.
3. The survey
The 2009 Survey consisted of 25 in-depth interviews to gain a detailed understanding of investors’ views on the Draft Determinations. Interviews took place in August and September 2009.
As with previous surveys, Ofwat participated as a member of the Survey Steering Group, together with Water UK and water company representatives.
4. The survey team
The survey was carried out by Indepen Ltd and led by Matt Parr. 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, and have carried out a series of Investor Surveys sponsored by Water UK.
They are currently conducting a similar survey for the UK electricity distribution sector. Further information can be found at www.indepen.co.uk
