Moody’s outlook on SEW stable after shareholders’ £200m equity pledge

Moody’s has changed South East Water's (SEW) credit rating outlook to stable and affirmed its Baa3 ratings. This reflected the commitment by SEW’s shareholders to inject £200m of equity into SEW in May. The equity injection is equal to approximately 11% of the company's Regulatory Capital Value (RCV) as of March 2025 and will reduce Net Debt / RCV to around 65%.

Moody’s noted that SEW's shareholders have demonstrated a strong commitment to bolstering the company's financial position and defending its investment grade rating. In December 2024 they injected £75m. The new equity has given SEW sufficient liquidity to cover upcoming debt maturities and it now has sufficient liquidity to last until September 2026.

Moody’s recognised that SEW received one of the most challenging determinations for the AMP8 regulatory period and has appealed to the Competition and Markets Authority. If SEW does not receive a more favourable regulatory settlement than Ofwat's determination, and SEW doesn't make material progress in resolving its operational and resilience challenges during AMP8, Moody’s sees an increased risk of operational underperformance in future controls. Moody’s may tighten its leverage guidance if it appears likely that SEW will suffer a structural shortfall in totex allowances or accrue material Outcome Delivery Incentive penalties in future controls stemming from the operational and resilience challenges it faces.