Pennon to Raise £550m, Cut Dividend After Water Failures
Pennon Group said on 7 October 2026 it will raise £550m from investors as part of a £1bn investment to improve outcomes for customers and communities. The plan was published as a Strategic Update called "project Proteus" and focuses on South West Water and its wider regulated portfolio. The Guardian
The £550m will come through a fully underwritten rights issue, where new shares are offered to existing shareholders and banks guarantee to buy any left over. UK Investor Magazine Pennon shares fell by as much as 22% on 7 October, the largest fall on the FTSE 250 index of mid-sized London-listed companies.
The new equity comes with a lower payout. Pennon cut its shareholder dividend by about 30%, including the effect of the share sale, as part of its operational reset. It cut its total dividend for the year ending March 2027 to about £125 million from £138 million in fiscal 2026. Reuters For the year ended 31 March 2026, Pennon had recommended a final dividend of 20.03 pence per share, payable on 4 September 2026.
Chief executive Keith Haslett, appointed in April 2026, said the infrastructure plans will not be funded by further increases to customers' bills. Pennon supplies water to about 3.5 million customers across south-west England and 380,000 business customers around the UK. The group also owns Bristol Water and SES Water.
The fundraising came days after South West Water was fined a record £7.9m for hundreds of sewage spills. The company said the nearly £8m fine for environmental offences will be paid by shareholders rather than through bill increases. In June 2026 South West Water was fined £1.85m after pleading guilty to supplying water unfit for human consumption following a 2024 parasite outbreak in Brixham, Devon.
Pennon paid about £42m in outcome delivery incentives, the penalties set by regulator Ofwat when companies miss water and wastewater targets, in the year to 31 March. It expects to keep facing Ofwat penalties until 2030 but aims to reduce them by at least 50% a year.
Operationally, Pennon is bringing leakage teams that were outsourced back in-house. South West Water has also applied for a ban on non-essential water use for some businesses across parts of Devon and west Dorset.
The broader context here is that the cost of repair now sits with shareholders. Dilution hurt existing holders. The dividend cut absorbs part of the adjustment, while the pledge on bills closes the customer funding route. Credibility now rests on the penalty trajectory. A target of 50% annual reduction to 2030 leaves little room for delay, especially with leakage work being rebuilt internally and supply limits already visible in Devon and west Dorset. For Ofwat, the run of fines, penalties and a shareholder-funded plan will test whether stronger finances can make up for weak operational delivery in the short term.
