Proactive Investors - UK water companies will need to invest £272 billion – three times the sector's current £94 billion existing capital value – to meet commitments on leak reductions and sewage treatment, according to Moody's.
On the basis of the industry’s own forecasts, the credit agency said significant new debt and equity funding will be needed if the sector's plans are to be delivered.
At the start of this month, water industry regulator Ofwat confirmed companies' plans to raise household bills to pay for a 90% increase in levels of investment, setting aside £96 billion of investment in water and sewage infrastructure between 2025 and 2030.
Earlier in the summer, water companies apologised for the industry's record on sewage spills and for "not acting quickly enough". They promised to increase investment, even though they want customers to pay for it.
To fund improvements, customer bills are expected to rise by an additional £7 per month by 2025, ballooning to £13 per month in 2030.
Severn Trent PLC (LON:SVT) recently moved to strengthen its balance sheet, announcing a £1 billion fundraise that includes a £500 million investment from the Qatar Investment Authority. The company plans to invest £12.9 billion between 2025 and 2030.
Analysts at JPMorgan (NYSE:JPM) said that returns from the listed UK water companies, Severn Trent, Pennon Group (LON:PNN) PLC and United Utilities Group (LON:UU) PLC, were "unattractive" based on their current plans and share prices, though at Jefferies they see the trio's business plans as presenting an “unprecedented opportunity for multi-year growth”.