Moody’s eyes Wessex Water for cut

Moody’s Investors Service said it placed on review for downgrade the A3 senior unsecured debt ratings of Wessex Water Services Finance plc, whose issuance is guaranteed by Wessex Water Services Limited.

The rating action follows 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 which, in conjunction with challenging performance targets and gaps between allowed and requested expenditure, will weigh on Wessex Water’s credit quality.

Ofwat’s allowances for base operating and maintenance expenditure, excluding enhancement projects but including retail costs, were £1.7 billion, roughly £28 million below what the company requested, an efficiency challenge of only 1.6%, but the final determination also continued to include significant disallowances on enhancement expenditure of around £138 million.

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