Ofwat looks to standardise credit rating and cash lock up licence conditions

Ofwat is looking to standardise what are currently industry leading cash lock up and investment grade credit rating requirements in all company licences.

It is consulting on rolling out a common set of standards which include strengthening requirements to maintain an investment grade credit rating and accepting restrictions on pay-outs to shareholders by any company put on a ‘negative watch’ by credit rating agencies.

The regulator explained that companies whose licences have been recently updated – notably Severn Trent and Hafren Dyfrdwy – contain provisions which require they “must” maintain an investment grade rating, whereas other companies’ licences only require use of “reasonable” or “best” endeavours” to maintain an investment grade rating. The new proposals would bring all licences to the industry leading standard.

The news came as Ofwat also confirmed Thames Water and Portsmouth Water have agreed to a suite of changes which today bring their licences up to the industry leading standard.

The provisions are intended to further safeguard customers’ interests by ensuring water companies remain financially robust and continue to attract investment. All regulated companies currently meet their credit rating requirements.

The consultation is open until 8 January 2019.