Energy recovery fires up Pennon as water arm outperforms under cost pressures
Group revenue growth at Pennon was flat year-on-year at £1,352m for 2015-16 with profit before tax similarly unchanged at £211m. Earnings growth in the group’s on-site power generation from its energy recovery facilities (ERF) and the contribution from the April 2015 Bournemouth Water acquisition offset a £13.5m hit from regulatory revenue changes. Group operating profit was up 6% at £262m with £224.5m from the water operation – down 0.4% from the previous year.
Profit before tax at Pennon’s waste management arm Viridor was up 10.8% on the previous year to £30.7m while for the water business pre-tax profit was off 1.3% at £165.7m before a non-underlying further cost of £5.2m in restructuring charges.
The water business’ revenue was up 4.7 % as a 3.3% fall at South West Water was offset by income from Bournemouth.
Water totex outperformance was £56m on a totex allowance of £401m with £53m from South West Water and £3m from Bournemouth Water. The total included integration synergies delivered to date. Bournemouth’s integration was reported as delivering operating synergies of about 10% delivering £27m over the AMP6 period.
Operational delivery incentive outperformance generated a net reward of £2.1m for the reported year.
Pennon’s eight operating ERFs provided a hedge against energy costs within the group with a third of its generation providing a 90% hedge for 2016-17 and more than 50% hedged to 2020.