Pennon shares tumble on rights issue, dividend cut

(Sharecast News) - Shares in Pennon tumbled on Wednesday after the water utility unveiled a rights issue and cut its dividend as part of a major operational reset and increased investment programme.

The water utilitiy company said it planned to raise around £550m through a fully underwritten 7-for-15 rights issue, with 220.3m new shares priced at 250p each. The issue price represents a 35.5% discount to the theoretical ex-rights price based on Tuesday's closing price.

The company also said its total dividend for the year to March 2027 would be rebased to around £125m from £138m previously. Taking into account the rights issue and adjusting for the bonus factor, this equates to an underlying reduction in dividend per share of around 30%, to about 18p. Pennon said it intends to grow the payout in line with CPIH thereafter.

The measures will help fund a significant increase in investment across Pennon's regulated water businesses, with capital expenditure during the AMP8 regulatory period now expected to total around £3.6bn, roughly £1bn above its original plan.

The group said the additional spending would improve asset health and operational performance, with regulatory capital value now expected to grow by more than 40% during AMP8.

Chief executive Keith Haslett said the review had identified areas where Pennon needed to improve, with the new plan focused on "clearer accountability", bringing key skills in-house and increasing investment in its assets.

Pennon is also proposing to sell Pennon Power, with some proceeds reinvested in renewable generation and the remainder used to reduce debt.

PNN shares were down nearly 16% at 380.20p by 0919 BST.

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