Pennon faces massive losses tied to Devon water supply crisis

In Devon, a significant parasitic outbreak took place earlier this year, severely impacting the owner of South West Water, Pennon. This incident led to multiple people being hospitalized and over 100 reported cases of various symptoms, including diarrhoea. The company calculated the total cost of the outbreak to be around £16.3 million, primarily due to compensation paid to affected customers and measures taken to restore safe water supply. The company's financial report highlighted a substantial pre-tax loss of £38.8 million for the six-month period leading to September, illustrating the severe financial repercussions of the incident. Pennon has faced growing public scrutiny in recent years regarding corporate accountability and the quality of water supply, particularly as they navigate the complexities of rising operational costs and plans for increased customer bills. Following the outbreak, Pennon has made notable efforts to rectify the situation, including providing eight weeks' worth of bottled water for those affected and undertaking extensive cleaning and filtering of the water supply infrastructure. The CEO, Susan Davy, emphasized the importance of taking responsibility when failures occur, indicating a commitment to improving the company's service and response mechanisms. Despite incurring losses and ongoing challenges, Pennon is also prioritizing infrastructure upgrades, with capital spending increasing significantly, reaching £331.8 million for the first half of the year. In a bid to mitigate the impact of its financial issues and the outbreak, the company also sought regulatory approval to increase water bills by 23% over the next five years, amidst heightened public backlash against water companies over pollution incidents and rising executive pay. This request is currently under review by Ofwat, and their final decision is expected in December. South West Water has also initiated a campaign to encourage customers to conserve water consumption, although this has adversely affected its revenue in the first half of the year. Moreover, after acquiring Sutton and East Surrey Water for £350 million, Pennon faces additional restructuring costs, amounting to around £4 million, as it works on integrating the newly bought business while addressing its loss-making performance. This added complexity highlights the challenges faced by water companies as they balance profitability against public service expectations in an evolving regulatory landscape.