United Utilities, one of the UK's largest listed water companies, is asking shareholders for £800 million as part of its plans to increase investment capacity. The FTSE 100 firm is calling on regulator Ofwat to raise its AMP8 budget—the five-year investment period running until 2030—from £9 billion to £11.5 billion to support growth in the North West.
Drivers of Demand
The increased demand for water stems from a boom in AI zones requiring significant water for cooling, as well as 66,000 new homes being built. To support these developments, 34 new wastewater sites need approval. The company expects these plans to create 4,000 new jobs.
Funding the Expansion
To cover the extra £2.5 billion, United Utilities is asking investors to buy £800 million in new shares, a method that keeps debt levels stable. Chief Executive Louise Beardmore said: “With our upgraded financial framework, sector-leading financing performance and strong delivery track record, we are confident in our ability to generate attractive and sustainable returns for shareholders while delivering for our customers, communities and the environment.”
Financial Performance
The water giant posted a 22% increase in revenue for the year to the end of March, reaching £2.6 billion, while pre-tax profit more than doubled to £779 million. The company also raised its dividend by 3.5% to 35.78p. United Utilities shares rose 10.9% to 1,455p in early trading on Thursday, and are up more than 20% since the start of the year.
Market Reaction
AJ Bell investment director Russ Mould commented: “Plans for a massive flood of investment at water utility company United Utilities has created an unusual level of excitement for a part of the stock market historically seen as pretty boring. In more recent times the water sector’s name has been mud with investors, regulators, the public and politicians thanks to issues around pollution and financial mismanagement across the broader sector. The plan to support areas like data centres, clean energy and new homes is being taken as a game changer by investors for now, although delivering on this big programme of spending and remaining on time and on budget is the big challenge for the company.”
