South East Water, which serves 2.3 million people across Kent, Sussex and Surrey, said it is ‘in discussions with lenders and shareholders regarding additional liquidity’
South East Water, a struggling water firm serving 2.3 million people across Kent, Sussex and Surrey, has revealed it is in need of a cash injection from investors to stay afloat as it awaits a crucial Ofwat ruling on its future spending plans.
The company stated it is “in discussions with lenders and shareholders regarding additional liquidity”. The talks are reportedly at an “advanced” stage and bosses “expect” to raise the extra funding, but no deal on the investment has been finalised yet.
In a results statement released on Wednesday, the company warned: “If it is not possible to raise the additional liquidity, the group and therefore company would not have sufficient liquidity for the going concern period,”.
Furthermore, it highlighted that “the risk that the funding will not be received constitutes a material uncertainty that may cast significant doubt on the ability of the group and company to continue as a going concern”. South East Water is already on regulator Ofwat’s watch-list for financially at-risk companies, alongside Thames Water and other regional monopolies.
On Thursday, a draft verdict from Ofwat on water companies’ five-year spending plans and bill increases to 2030 will follow the company’s financial update. This will initiate six months of negotiations with Ofwat, leading up to its final decision in December.
South East Water has proposed plans that would see spending rise to £1.9billion to maintain and update its infrastructure. However, this would also involve increasing customer bills by 22%. The search for funding comes after South East Water’s owners provided a £150 million loan to a unit in the utility group earlier this year.
The company managed to narrow its pre-tax loss to £36million in the year ending March 31, a significant improvement from the £74million loss reported the previous year. Meanwhile, turnover saw a 9% increase to £281million.
It is also still under investigation by Ofwat for an incident in June 2023 when the company failed to deliver water to thousands of customers for more than a week. The consequences could include a hefty fine from the regulator.
South East Water said: “Since the investigation was launched, we have entered into a constructive and transparent dialogue with Ofwat. Our colleagues, contractors, partners and stakeholders have all played a vital role in ensuring we kept the taps flowing for as many customers as possible, even during the extreme weather which impacted on our operations and overall performance in 2023/24.
‘Despite all our efforts, there were still some issues during the year and we’d like to apologise to customers who experienced any supply interruptions.”
