Fitch forecasts AMP8 fortunes
- by Verity Mitchell
- May 26
- 1 min read

Fitch Ratings has issued a report on the UK water sector giving further detail around its assumptions for Outcome Delivery Incentives (ODIs), fines, total expenditure (totex) underperformance and debt costs in AMP8. Fitch said it has used conservative modelling, cutting sector debt capacity moderately and tightening net debt to regulatory capital value (RCV) by 2% and post-maintenance interest coverage ratios (PMICRs) by 0.1x for the average company, while keeping the regulatory environment midpoint steady at ‘a-’.
Fitch considered that cash flow impacts will now be more severe for weaker performers and more favourable for stronger ones. It forecast net cash ODI penalties of £560m in AMP8, and Environment Agency (EA) or Ofwat fines of about £900m (of which £300m relates to Thames, for which it does not provide a rating).
Fitch’s view was that Ofwat’s emphasis on infrastructure enhancement will be beneficial in the long term. However, AMP8 brings challenges in managing totex, price control deliverable (PCD) clawback risks, the ODI framework and financing performance.
Fitch assumed the companies it rates will need to raise £37.5bn of new debt and £5.2bn of new equity, with dividend distributions of £5.3bn. Fitch took no account of any upside from price determination appeals for the companies it rates. Its assumptions included penalties from Ofwat’s ongoing investigations of £17m for Northumbrian and £104m for Thames, with the proposed £47m penalties for Yorkshire adjusted to a £40m redress package.
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