30th Jan 2015 10:03
LONDON (Alliance News) - Dee Valley Group PLC Friday said it will announce its future dividend policy in due course, after it joined peers in accepting the UK water regulator's final determination of the price limits imposed on UK water companies for the next five years.
Like peers, Dee Valley said Ofwat's decision to allow companies a considerably lower return on capital of 3.6% over the period, down from 5.1% under the last price regime, presented significant challenges.
It said Ofwat's decision will mean average household water bills will fall by 2% on average to about GBP142 a year over the review period, while the company will be investing up to GBP50 million in its business, which it claims if its largest ever capital programme.
"The board will announce its future dividend policy in due course following finalisation of its financing arrangements in relation to the above-mentioned capital programme," Dee Valley said in a statement.
Ofwat was tough on the water companies for the latest five-year price limit review, insisting they cut customer bills while keeping up investment in replacing the UK's ageing and leaky water network. The result of has been cuts to dividend payouts.
On Wednesday, Severn Trent PLC cut its dividend for its next financial year by 5%, and then said it would increase by at least inflation measured by the Retail Price Index until 2020, a significant downgrade from previous increases of RPI plus 3%. United Utilities PLC has also linked future dividend increases to RPI.
However, investors seem happy with the reduced level of payout, after fearing bigger cuts.
Investec on Thursday hiked its price targets on Severn Trent and United Utilities, arguing both have emerged from the Ofwat price review in reasonable shape, though it remains cautious on the medium-term outlook for both.
Dee Valley Group shares were untraded Friday, having last traded at 1,230.00 pence.
By Steve McGrath; [email protected]; @stevemcgrath1
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