Pricing uncertainty looms for UK water companies

UK water companies face real uncertainty over price regulation from 2015 onwards, as industry regulator Ofwat presses ahead with plans to introduce meaningful competition into large sections of the business.

At a briefing on 3rd March, Ofwat chief executive Regina Finn said that everything to do with setting price limits was “up for grabs” as the process was reviewed in the light of future market reforms – which could well see competition extended into most areas of the industry.

Lakis Athanasiou, sector analyst at Evolution Securities, warned that the changes could have serious implications for companies’ regulated asset values, on which decisions to invest in the industry are based.

“Investors need to be keenly aware that the industry could be at a turning point in the way that it is structured,” he said. “They should not be blinded by the fact that competition has been a damp squib in the past.”