United Utilities Jumps Most in Six Years on Investment Boost
(Bloomberg) -- United Utilities Group Plc rose the most in six years after announcing plans to spend an extra £2.5 billion ($3.4 billion) by 2030 to supply new data centers, houses and upgrade aging pipes.
The water and sewerage supplier for the Northwest of England will raise £800 million in fresh equity to help cover the first investment tranche of £1.4 billion, according to a statement on Thursday.
The shares sale is expected to price at 1,312 pence per share, according to terms seen by Bloomberg, in line with Wednesday’s closing level. The offering has already drawn a £400 million cornerstone investment from Atlas Infrastructure, the company said in a statement.
The extra spending still needs to be approved by the regulator Ofwat, with a draft decision is expected in August. The company said it was confident of its business case.
Shares of the utility jumped to pence as of in London, a record high.
The initial increased investment would cause bills to rise by around £10 per average household by 2030, on top of the 32% increase already approved by Ofwat, a spokesman for the company said.
Britain’s privatized water industry has faced public anger over chronic leaks, sewage spills, rising bills and financial problems. Debt-laden Thames Water, the UK’s biggest supplier, has been on the brink of collapse for two years, while South East Water has had multiple prolonged supply outages in the past six months.
United Utilities said the equity fundraising would keep its gearing — the ratio of net debt to equity — at 55% to 65% through the investment program.
United’s placing joins a string of equity offerings from UK utilities over the last couple of years, including water company Pennon Group Plc’s rights offering that raised £490 million last year and network company National Grid Plc’s £7 billion share sale in 2024 to fund its net-zero push.
“This focused, disciplined and well-funded plan will help us accelerate delivery of the transformation in infrastructure and services that the Northwest expects and deserves,” United Utilities Chief Executive Officer Louise Beardmore said in a statement.
There was enough demand from investors to cover the offering on Thursday morning, the terms showed. Deutsche Bank AG and JPMorgan Chase & Co. are managing the process. It comes after a 16% rally in United’s shares over the past year.
The move may prompt other companies such as Severn Trent Plc to also ask Ofwat to reopen their five-year business plan settlement, said Jenny Ping an analyst at Citigroup Global Markets.
“The incremental capex plan comes in higher than we initially expected, but we expect the raise should be welcomed given the uptake as well as seeing other names in sector reacting positively from recent equity raises,” she said in a note.
(Updates from third paragraph with details on share sale and analyst comment)
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