Pennon signals possible hive off for its waste management arm

South West Water’s parent, Pennon Group, has unveiled plans “to conduct a full review of the strategic focus, growth options and capital allocation policy for the group” sparking speculation the waste arm, Viridor, may be sold off.

In its latest trading review Pennon reported that the proposed review was appropriate given Viridor’s current “strong financial performance and operational progress” and its “growth opportunities” in the near and medium term along with the forthcoming start of AMP7 for South West Water.

Pennon said South West Water delivered “resilient operational performance” but revenue for the half year to 30 September 2019 would be reduced to a more normal level year on year following the revenue boost in the previous year’s exceptionally hot summer.

The comply reported cost savings maintained the water and wastewater firm’s total expenditure outperformance on target to deliver some £300 million savings for the current price control period. Return on Regulated Equity (RORE) at at about 11.8% remained on track for outperformance for 2019/20 according to the statement.