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Moody’s reviews Anglian Water for trim
Moody’s Investors Service said it placed on review for downgrade the Baa1 corporate family rating of Anglian Water Services Ltd. (Anglian Water), as well as the A3 senior secured and Baa3 subordinated debt ratings of the Class A and Class B notes issued by Anglian Water Services Financing plc. Concurrently, Moody’s placed on review for downgrade the Ba3 senior secured ratings of Anglian Water (Osprey) Financing plc.
The A2 rating of those bonds that are subject to a financial guarantee by Assured Guaranty (Europe) plc (A2 stable) of timely payments of scheduled interest and principal will continue to reflect the insurance financial strength rating of the guarantor.
The rating actions follow publication by the Water Services Regulation Authority (Ofwat), the economic regulator for water companies in England and Wales, of its final determination for the forthcoming regulatory period. The determination includes a significant cut in allowed returns, challenging performance targets and a substantial gap between the expenditure that Ofwat has allowed and what the company believes is necessary to deliver required outputs.
Ofwat’s allowance for base operating and maintenance expenditure, including retail costs and growth but excluding other enhancement projects, was £4.1 billion, roughly £500 million below the amount Anglian Water requested in its response to the draft determination and £600 million below the business plan it submitted in April 2019. This gap, representing 11-13% of planned expenditure, is the largest of any water company, and is largely attributable to differing views on population growth in Anglian Water’s service area and resulting investment needs.
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