2020/21 was a transformative year for Pennon Group. On 8 July 2020, we completed the sale of Viridor to KKR for net proceeds of £3.7 billion. The sale recognised the strategic value developed by Pennon over many years, realising significant value for shareholders, and creating the opportunity to refocus the Group exclusively on UK water.
The Group undertook a highly disciplined strategic review of potential growth options as it looked to deploy the net proceeds. This strategic review considered a range of factors including earnings accretion, value creation from the impact on shareholder returns (both income and growth) and the impact on customers and other stakeholders. All opportunities were been benchmarked against a return of capital to shareholders.
The acquisition marked an important step in that review, with the Board considering the Bristol Water Group to be highly complementary to the Group. The Board believes that the acquisition provides an attractive opportunity to expand South West Water’s wholesale capabilities, whilst also deploying best practice from both businesses to deliver value for customers, shareholders and broader stakeholders.
The acquisition increases the size and scale of the Group to serve a total of c.3.5 million customers in our region and will deliver an estimated 16% increase in RCV. It also adds another 500 dedicated employees to the Group, enabling access to a new, wider and diverse talent pool in the South West, with further opportunities to become an employer of choice.
Pennon funded the cash consideration for the acquisition from existing cash resources. The acquisition was not conditional on any acquisition financing and did not involve any deferred consideration.
The merger of South West Water and Bristol Water completed on 1 February 2023 with the combined water business now operating under one licence. The merger and statutory transfer mark a further step on our integration blueprint, focused on bringing together the best of the best to realise operational and service improvements across the Group
Detail on adjustments to Pennon’s base dividend, reflecting the accretive nature of the acquisition and the new shape of the Group, were set out in Pennon’s full year results for 2020/21, published on 3 June 2021.
Susan Davy, Group Chief Executive, commented:
‘The acquisition of Bristol Water brings great people and a great business to Pennon and I am hugely excited about building a future together. We see attractive opportunities to continue to invest in the Bristol Water business to deliver enhanced resilience and water security to benefit customers in Bristol and beyond. This latest acquisition, building on a strong heritage and history, firmly cements Pennon as one of the leading UK water and waste water companies.