United Utilities tight-lipped on Ofwat as H1 profits flat

24th Sep 2014 07:02

Water company United Utilities remained tight-lipped on negotiations with regulator Ofwat over its future price structure, but said underlying first-half profits were at a similar level to last year's.Extending the pattern from the first quarter, revenue for the half-year to end-September was higher thanks to an allowed regulated price rise, but was offset by the impact of a customer discount, an increase in depreciation and other cost pressures. This was all as expected.Net debt at the end of September 2014 is expected to have risen slightly in the last three months as the company continues to invest in its asset base, but gearing is still well within Ofwat's stipulated range.Customer service has continued to improve, United said, underpinned by operational and environmental performance, and the company remains confident of delivering its regulatory outperformance targets.On its regulatory wranglings, the water company said management were engaged in "detailed dialogue" with Ofwat and other stakeholders, with a focus on the vast differences in wholesale prices for between United's business plans for 2015-2020 and Ofwat's own draft calculations.Ofwat disallowed £990m of proposed costs from United's business plan, with no other water company having even a quarter of that level.Broker Liberum described it as "a massive regulatory failure" by the company and said the impass "will threaten its dividend if it flows through into the final determinations due out in December".United is scheduled to submit its response to the regulator by 3 October and Ofwat is expected to publish its final determinations for all water companies on 12 December.