The owner of South West Water, one of the UK utility firms fined for illegal sewage dumping last year, has bought Sutton and East Surrey (SES) Water in a deal worth £380m.
Pennon, which also owns Bristol Water and Bournemouth Water, has confirmed the acquisition of the supplier, which has 745,000 customers across parts of Kent, Sussex, Surrey and south London.
South West Water was one of a number of providers to be fined over illegal dumping of sewage last year after investigations by the Environment Agency.
It was fined £2.15m in April over failures between July 2016 and August 2020 that led to harmful sewage being dumped by treatment works into rivers and seas in Devon and Cornwall.
Across the 2022-23 period it spilled untreated sewage water 37,649 times. In May, Pennon’s chief executive, Susan Davy, who received a £522,000 bonus in 2022-23, was one of three UK water bosses to give up her bonus due to sewage performance.
SES Water was put up for sale by its owner, Sumisho Osaka Gas Water UK, nearly a year ago. Pennon will pay an initial purchase price of £89m for equity, with the total enterprise value, which includes the company’s equity and its debt, coming to £380m.
The water provider, which is based in Redhill, Surrey, has 476 employees, who will transfer to Pennon after regulatory approvals. It is the FTSE 250 firm’s latest acquisition of a UK water company after it acquired Bristol Water in 2021, and Bournemouth Water in 2015.
Pennon said the latest acquisition would be in addition to an £850m investment in its water businesses over the next two years, with the company planning £2.8bn in investment between 2025 and 2030.
Pennon also announced plans for a £180m equity raise designed to keep its debt levels in line with existing targets following the deal. The company plans to offer the shares to both corporate and private retail investors at 61.05p each, with a minimum purchase set at £250 for each investor.
SES customers will be given the chance to join Pennon’s WaterShare+ scheme, where customers are once a year offered the opportunity to become shareholders in the group. If they do not take the shares, they get the money off their next bill.
Davy said: “SES Water is a fantastic growth opportunity for Pennon, demonstrating our commitment to the UK water industry.
“As part of the Pennon Group, we will enhance SES Water’s financial resilience and better position the business to serve its customers and all stakeholders, as has proven to be the case with our acquisitions of Bournemouth Water and Bristol Water.
“We are able to invest in SES Water’s resources infrastructure, environment and people thanks to our strong financial performance and long-term UK shareholder base, delivering a seamless transition for SES Water’s customers while also providing an even more robust and reliable service to customers.”
