Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- United Utilities Group PLC (UUGRY, Financial) has received positive feedback from Ofwat regarding their plans, indicating productive and constructive conversations with regulators.
- The company has a strong balance sheet with 60% debt to RCV and a fully funded pension scheme, reflecting its financial stability.
- United Utilities Group PLC (UUGRY) has been proactive in addressing combined sewer overflows with a GBP500 million program of accelerated investment.
- The company has been recognized as the leading company in terms of contribution to ODIs, reflecting its commitment to performance improvements.
- United Utilities Group PLC (UUGRY) has a comprehensive affordability suite in place, with the ability to help one in six customers, supported by GBP500 million worth of support.
Negative Points
- Moody's has issued a negative outlook for United Utilities Group PLC (UUGRY), highlighting potential headwinds and the need to understand how these will play out.
- There is concern about the impact of potential downgrades in credit ratings, which could affect the company's cost of debt.
- The company faces challenges in meeting the 60% gearing threshold set by Moody's for maintaining its A3 rating.
- There is uncertainty regarding the final determination from Ofwat, which could impact the company's financial planning and cash flows.
- The sector faces broader regulatory risks, with Moody's downgrading the regulatory risk assessment from AAA to single A, affecting the perceived quality of regulatory cash flows.
Q & A Highlights
Q: Can you provide an update on the timeline for the regulatory review and your outlook for the next AMP?
A: Louise Beardmore, CEO: We are focused on December 19 for the final determination. We plan to update the market early in 2025 after thoroughly reviewing the determination. We want to ensure we understand the package, including totex, ODIs, and funding, before making any announcements.
Q: How are you addressing the recent Moody's rating outlook change from A3 to BAA1?
A: Philip Aspin, CFO: We have a strong balance sheet with 60% debt to RCV and a fully funded pension scheme. Moody's has issued a negative outlook, not a downgrade, highlighting potential headwinds. We are monitoring the situation and will assess the impact of the final determination on our credit ratings.
Q: What is your perspective on the government's review of the water sector and the accelerated investments in sewer overflows?
A: Louise Beardmore, CEO: We welcome the government's review, which focuses on future improvements in the sector. We are investing GBP500 million in accelerated sewer overflow projects, with 700 sites identified for tactical interventions to reduce spills. This aligns with our commitment to improving infrastructure and meeting regulatory targets.
Q: How do you view the recent changes in the ODI mechanism proposed by Ofwat?
A: Louise Beardmore, CEO: We are backing ourselves to deliver on ODIs. Ofwat has acknowledged the need for a more balanced incentive regime and is considering company-specific targets and regional variations. We advocate for an in-year true-up mechanism to drive performance and avoid long-term adjustments.
Q: What are your thoughts on the potential impact of increased bills on consumers and the need for additional support measures?
A: Louise Beardmore, CEO: We have strong customer support for our proposed bill increases and a comprehensive affordability suite in place. We are advocating for a national social tariff to provide consistent support across regions. The expected bill increase is about GBP1.50 per month, and we are well-positioned to manage this transition.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
