United Utilities to continue with dividend policy despite flak over sewage spills

United Utilities (UU), the North West water and wastewater utility based in Warrington, said it has accepted regulator Ofwat’s Final Determination of how much it can charge customers and invest for the next five year period, up to March 2030.

It also confirmed that it will continue with its dividend policy of growing shareholder payouts by CPIH (Consumer Prices Index including owner occupiers’ housing costs) inflation, in line with its long term dividend strategy.

This is despite a growing public outcry at the industry’s dividend payouts, while some water companies face huge debt burdens and increasing flak over sewage spills.

UU says its £13bn investment across 2025-30 will enable it to deliver on “the things that matter for customers, communities and the environment”, namely:

• Delivering c.£5.7bn enhancement expenditure, including an industry-leading £2.4bn CSO programme to deliver a 60% reduction in spills from storm overflows this decade
• Improving water quality for more than two million customers and enabling economic growth across the region
• Annual asset base growth of c seven per cent per annum, taking UU’s AMP8 closing asset base to more than £21bn
• Putting in place a sector-leading £525m package of support, helping one in six households to pay their water  bill by 2030
• Supporting 30,000 jobs and contributing £35bn of economic value in the North West

CEO, Louise Beardmore, said: “With the final determination agreed, we are now able to progress what will be the largest investment in water and wastewater infrastructure in over 100 years, to build a stronger, greener and healthier North West.

“This historic £13bn investment will support 30,000 jobs across the North West, bringing focused investment in skills and opportunities, supporting economic growth in our region.

“Alongside record levels of investment, we are committed to maintaining affordable bills and providing support to customers who need it most. With a sector-leading affordability package totalling £525m, we’re putting in place financial support to approximately one in six households across the North West – that’s approximately a 70% increase in the level of customer support provided this AMP.”

She added: “Most importantly, today’s announcement means we can move forward and deliver the step change in performance we all want to see.”

The group said it is in a strong financial position, with £2.6bn of liquidity extending out to financial year 2027.

UU also published a third quarter trading update this morning, that showed it has continued to deliver a strong operating performance. It maintains its FY25 financial guidance and remains on track to deliver net ODI (outcome delivery incentives) rewards higher than last year’s £34.5m

The group recently announced a preferred bidder to design, build, finance and maintain the replacement of six tunnel sections under the Haweswater Aqueduct Resilience Programme (HARP). 

The aqueduct supplies water to 2.5 million people in Cumbria, Lancashire and Greater Manchester and will be one of the largest water infrastructure projects undertaken in the North West, with an estimated construction cost of between £2.5bn and £2.9bn.

In other news, England’s major water and sewage companies, including the North West’s United Utilities, are ‘greenwashing’ the public and government, according to a new report.

A study, published in Nature Water, claims the privatised companies are using strategies which mirror those of the tobacco and fossil fuel industries to mislead the public and government.

The research – by environmental experts from The University of Manchester and the University of Portsmouth, Windrush Against Sewage Pollution (WASP) and an independent scientist – uncovered widespread use of greenwashing and disinformation tactics by England’s nine major water and sewage companies.

Addressing the dividends issue, Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “While this steady drip of money to shareholders is unlikely to go down well with households facing higher bills, the hard reality is that these companies need to keep the market onside in order to meet their commitments now and in the future.

“Poor performance over several years from the perspective of customers and shareholders means these companies don’t have much goodwill to count on and precious little margin for error on delivering what they have promised.”