Pennon Group (LON: PNN), the Exeter-based owner of South West Water, has launched a fully underwritten rights issue to raise about £550m. Announced at 7.01am today, it offers seven new shares for every 15 held, at 250p, which is 44.7% below yesterday’s close.
London had not opened at the time of writing, so there is no trading reaction yet. The shares closed yesterday at 452p, valuing Pennon at about £2.13bn.
The company will issue 220,257,997 new shares, raising about £530m after costs, with Barclays and Morgan Stanley underwriting the offer. Pennon said it set the price after discussions with major shareholders. The 250p price is also 35.5% below the theoretical ex-rights price of 387.73p, the value implied once the new shares exist.
The money funds higher investment in its regulated water businesses, including a cost change programme, and keeps gearing, the debt carried against its asset base, within policy. Keith Haslett, who joined as chief executive on the 1st of April, concluded a review that puts water capital spending in the current regulatory period at about £3.6bn, roughly £1bn above the original plan.
That lifts expected growth in regulatory capital value, the asset base the regulator allows returns on, to more than 40% over the period against 34% planned. Ofwat’s draft determination recognises £230m of its cost change request, or 76%.
For holders the cost is dilution: the share count rises about 46.7%, and new shares will be about 31.8% of the enlarged company. The dividend is rebased to about £125m for 2026/27 from £138m, a cut of about 30% per share to around 18p after adjusting for the bonus element of the issue. It will then grow in line with CPIH, an inflation measure.
Our Funding Plan, including today’s fully underwritten rights issue raising c.£550m from shareholders to invest in the business, means we can deliver these improvements and drive growth supported by a strong balance sheet.
Keith Haslett, chief executive of Pennon
The raise follows a £490m issue in February 2025, which was expected to fully fund the current period. The board acknowledged the timing following those earlier funding measures.
Shares go ex-rights next Monday at 8am. CREST and non-CREST acceptances close at 11am on the 26th of October, and results follow on the 27th. An investor presentation is due at 9am today.
