Pennon announces £490m rights issue to support investment
By Josh White
Date: Wednesday 29 Jan 2025
(Sharecast News) - Pennon Group announced a fully underwritten £490m rights issue to support its investment programme through to 2030 on Wednesday.
The FTSE 250 water company said the offer woul;d provide existing shareholders with 13 new shares for every 20 held, at a price of 264p per share, representing a 35.2% discount to the theoretical ex-rights price based on the prior day's closing price.
It said the capital raise was part of a broader financing strategy aimed at funding Pennon's £3.2bn investment plan for the K8 regulatory period.
The firm said it expected the investment to drive a minimum 34% increase in its regulatory capital value while targeting a return on regulated equity of about 7%.
Pennon said the financing package would ensure gearing remained within its long-term target range of 55% to 65% for its regulated water businesses, with overall group leverage not exceeding that of the regulated businesses by more than five percentage points.
The board said it had accepted Ofwat's final determination for the K8 period, providing clarity on its financial strategy.
Alongside the rights issue, Pennon said it was adjusting its dividend policy, with the total dividend for the year ending March set at £129.3m, to be rebased per share to reflect the enlarged share capital.
The company said it intended to grow the rebased dividend in absolute terms by CPIH inflation through to March 2030.
It said the rights issue was fully underwritten by Barclays and Morgan Stanley, which were acting as joint global coordinators and bookrunners.
A prospectus detailing the offer was being published later on Wednesday.
At 0938 GMT, shares in Pennon Group were up 3.01% at 531p.
Reporting by Josh White for Sharecast.com.
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