Yorkshire Water to improve its financial resilience after regulator steps in

Regulator Ofwat says it it has closed an enforcement case into Yorkshire Water after the company agreed a plan to strengthen its financial resources to protect customers.

It means the utility company will recover two loans it had made to other businesses within its wider company group, totalling around £940m.

In addition to bringing this equity back into the regulated business, the company has also committed to improve its financial resilience and shareholders will put an additional £100m into reducing spills from storm overflows.

David Black, Ofwat chief executive, said: “Companies must be financially resilient if they are to tackle the challenges that affect customers and the environment.

“We are pleased Yorkshire Water recognised our concerns and is taking these active steps to improve its financial position in the interest of customers.

“We welcome the additional £100m shareholder funded investment to take urgent action to reduce spills from storm overflows.”

Ofwat opened the case due to concerns about the loans Yorkshire Water had made to other companies within its wider company grouping.

The regulator wanted to ensure these inter-company loan arrangements complied with requirements in Yorkshire Water’s licence that are intended to protect customers and ensure the regulated company has the resources it needs to deliver services effectively.

In November 2021 Ofwat’s Monitoring Financial Resilience report concluded Yorkshire Water had “weak levels of financial resilience” and had work to do to strengthen this “to the level reasonably expected of a provider of essential public services.”

Yorkshire Water says its investment to cut storm overflow spills will look to achieve a minimum reduction of 20% in permitted spills per year by March 2025 from the 2021 baseline.

It notes its shareholders have agreed to support the repayment of the intercompany loans and the additional investment to reduce storm overflow spills.

The company says this agreement demonstrates shareholders’ commitment to invest in improved performance to protect the environment and to ensure the financial resilience of the business.

Yorkshire Water and Kelda Holdings CEO, Nicola Shaw, said: “We understand the importance of continuing to have robust financial structures in place and believe the repayment of the intercompany loans will continue our resilience into the future in a time of significant external economic uncertainty.

“Our shareholders have committed to helping us make this repayment, including the additional investment in storm overflows which will have a significant impact on our rivers and coastlines here in Yorkshire.”

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