Pennon raising cash to fund £89m acquisition of SES Water

(Sharecast News) - Water utility company Pennon is raising up to £180m in an equity capital raise to fund the acquisition of Sumisho Osaka Gas Water UK, the holding company of Sutton and East Surrey Water (SES Water). The UK-listed group is buying SES Water and other ancillary businesses for £89m from Sumitomo Corporation and Osaka Gas, with a total enterprise value of £380m, when including net debt of £291m.

"SES Water is a fantastic fit for Pennon as we further expand our presence in water supply across Southern England, building on our successful similar acquisitions of Bournemouth Water and Bristol Water alongside the adoption of water supply in the Isles of Scilly," said Pennon's chief executive Susan Davy.

The equity raise is in order to ensure that the pro forma leverage and capital structure for the enlarged Pennon group following the acquisition remains consistent with its well-established water business gearing range of 55-65%, the company said.

The deal adds over 750,000 customers to Pennon, and SES Water's 2025-2030 K8 regulatory period regulatory capital value is expected to grow at an "attractive" average annual rate of 5%. It is predicted to be earnings accretive from the first year of full ownership.

"As part of the Pennon Group, we will enhance SES Water's financial resilience and better position the business to serve its customers and all stakeholders, as has proven to be the case with our acquisitions of Bournemouth Water and Bristol Water," Davy said.