United Utilities is putting its money where its mouth is.

The group provides water and wastewater services across the Northwest of England and is planning to invest a mammoth £13.7bn into cleaning up its act across 2025-2030, which it even describes as an ambitious and stretching target.

Replacing over 925km of pipes is no mean feat, but once complete this should drastically reduce the amount of sewage being spilt into our rivers and seas – something which utility companies have been heavily criticised for in the news lately.

LIS Show – MPU

A huge investment like this will support around 7,000 new jobs in the Northwest of England, as well as support more than 1 in 6 customers struggling to pay their bills.

But all this begs the question of where the money’s coming from.

It looks like £1.35bn of the cash will come from issuing new equity shares, which will have the effect of watering down existing shareholders’ ownership in the company.

Just shy of £4bn will come from issuing debt and this should keep the group’s gearing level at around 63%, towards the top of the group’s target range.

This might cause some issues and uncertainty for investors in the short term.

But today’s investment plan will increase United Utilities regulatory asset base by around 50%.

Given that the revenue United Utilities is allowed to earn is based on this figure, it should help bring cash in the door over the long term.

Aarin Chiekrie
Aarin Chiekrie, Equity Analyst at Hargreaves Lansdown.
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    Aarin Chiekrie
    Aarin Chiekrie, Equity Analyst at Hargreaves Lansdown

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