Ofwat has today confirmed a package of measures to strengthen water companies’ financial resilience, by calling on them to adopt a common set of standards. This includes strengthening requirements to maintain an investment grade credit rating and accepting restrictions on pay-outs to shareholders in certain circumstances.
The so-called cash lock-up conditions mean that if a water company is at risk of losing its investment grade rating, it is barred from making pay-outs to shareholders or removing money or assets from the business.
These changes are intended to further safeguard customers’ interests by ensuring water companies remain financially robust and continue to attract investment.
By proposing that companies must ensure an investment grade credit rating, greater clarity of expectations is provided to companies and a clearer decision making process for Ofwat.
Rachel Fletcher, Chief Executive at Ofwat said:
“Water companies must provide resilient services to their customers. To do that, they need to be financially resilient. To help secure that, we want to introduce clearer, consistent requirements and protections.
“These protections will give greater assurance to customers about all water companies’ financial stability and long-term resilience.”
Notes to editors
- Conclusions on strengthening the regulatory ring-fencing framework (original consultation)
- New conclusions document is available here
- Ofwat will proceed to consultation to make relevant modifications to water companies’ licences by notice under section 13 of the Water Industry Act 1991 (WIA91).