REG - Pennon Group PLC - Publication of Annual Report and Accounts 2022
20/06/2022 17:30
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RNS Number : 5401P Pennon Group PLC 20 June 2022
PENNON GROUP PLC
PUBLICATION OF ANNUAL REPORT AND ACCOUNTS 2022 & NOTICE OF AGM 2022
In compliance with Listing Rule 9.6.1 Pennon Group Plc (the "Company")
announces that the following documents have been submitted to the Financial
Conduct Authority electronically via the National Storage Mechanism and will
shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
· Annual Report and Accounts 2022
· Notice of AGM 2022
These documents have been posted to those shareholders who have opted out of
receiving electronic communications from the Company and may also be viewed on
the Company's website at www.pennon-group.co.uk
(http://www.pennon-group.co.uk) .
The Company will hold its 2022 Annual General Meeting ("AGM") at Peninsula
House, Rydon Lane, Exeter, Devon EX2 7HR, at 9.30am on Thursday 21 July 2022.
Remote participation and electronic voting will be provided, with further
information on this set out in the Notice of AGM.
The following information in the Appendix to this announcement is as set out
in the Company's Annual Report and Accounts 2022. It should be read in
conjunction with the Company's Full Year Results announcement released on 31
May 2022, which included a set of consolidated financial statements, a fair
review of the development and performance of the business and the position of
the Company and its main trading subsidiary companies. Together these
documents constitute the information required by Disclosure and Transparency
Rule 6.3.5.
Simon Pugsley
Group General Counsel & Company Secretary
20 June 2022
APPENDIX
Principal risks and uncertainties
(The following is extracted from the Annual Report 2022 and page numbers
referred to are those in the Annual Report 2022.)
The Group's business model exposes the business to a variety of external and
internal risks which are influenced by the potential impact of macro
political, economic and environmental factors. Specifically, the UK is
currently experiencing a high inflationary environment as a result of a number
of global factors.
While the ability of the Group to influence these macro level risks is
limited, they continue to be regularly monitored and the potential
implications are considered as part of the ongoing risk assessment process.
The Group performs a range of scenario planning and analysis exercises to
understand the risk exposure of one, or a number, of these events occurring.
The Directors confirm that during 2021/22, they have carried out a robust
assessment of current and emerging risks facing the Group, including the
consideration of risks associated with the activities of Bristol Water. The
assessment of the Group's principal risks has considered the impact on its
business model, future performance, solvency and liquidity. These principal
risks have been considered in preparing the Viability Statement on page 123.
Principal Risk Strategic Impact Mitigation Net Risk Appetite
Law, regulation and finance
A: Changes in Government policy
Long-term priorities The current UK Government remains supportive of the existing regulatory model. Medium We recognise that Government policy evolves. The Group seeks to minimise the
During the year the UK Government has published its Strategic Policy Statement
potential risk and maximise opportunities through regular engagement and
1, 2 (SPS) which sets the strategic priorities for Ofwat, enacted the Environment Increasing robust scenario planning.
Act and has consulted on their Storm Overflows Discharge Reduction Plan.
Changes in Government policy may fundamentally impact our ability to deliver
the Group's strategic priorities, impacting shareholder value. South West Water and Bristol Water have actively engaged and provided
responses during the consultation process.
The Group also regularly engages with MPs and other political stakeholders,
both directly and via Water UK, demonstrating the value from our operational
performance, continued investment in our network and wider societal
contribution.
Horizon scanning of emerging changes in Government policy, including policies
designed to mitigate the impact of climate change, is regularly undertaken to
monitor and assess the potential direct or indirect impact on the Group.
B: Regulatory Frameworks
Long-term priorities Certainty over the 2020-25 regulatory framework has been provided through High We accept that regulatory reform occurs and seek to leverage opportunities
South West Water's and Bristol Water's Final Determination.
where possible and minimise the potential risks by targeting changes which are
1, 2
Stable NPV neutral over the longer-term to protect customer affordability and
The Group's Regulatory Affairs Steering Committee monitors changes in the shareholder value.
Changes to regulatory frameworks may impact on the Group's priorities, regulatory environment.
performance and the service we provide to our customers which can impact
shareholder value. There remains the potential that regulatory mechanisms within the next Price
Preview period do not provide sufficient funding to achieve the environmental
ambitions set out by the Government within the Environment Bill.
Internal PR24 planning has commenced and both South West Water and Bristol
Water have actively responded to positioning papers from Ofwat which will
inform the PR24 price review methodology which will be published in July 2022.
C: Non-compliance with laws and regulations
Long-term priorities The Group operates within robust and mature frameworks ensuring compliance Medium The Group maintains the highest standards of compliance and has no appetite
with permit and other requirements of Ofwat, the Environment Agency and other
for legal or regulatory breaches.
1, 2 relevant regulators. These frameworks are subject to regular review and Increasing
enhancement to ensure the Group remains compliant with the increasingly
The Group is required to comply with a range of regulated and non-regulated complex legal and regulatory landscape. There remains an increased appetite
laws and regulations across our businesses. Non-compliance with one or a amongst regulators for pursuing enforcement action for perceived
number of these may result in financial penalties negative impact on our non-compliance with the Environment Agency and Ofwat both currently
ability to operate effectively and reputational damage. undertaking industry-wide investigations of wastewater treatment works permit
compliance.
The Group also maintains a comprehensive internal framework to ensure
compliance with corporate laws and regulations. This is reinforced through key
policies which are endorsed by the Pennon Board and refreshed legal compliance
training has been provided to staff during the year.
Confidential whistleblowing processes exist which allows concerns to be raised
confidentiality and appropriately investigated. Activity through the
whistleblowing process is reported periodically to the Pennon Board.
D: Inability to secure sufficient finance and funding, within our debt
covenants, to meet ongoing commitments
Long-term priorities The Group has well established treasury, funding and cash flow arrangements in Low The Group operates a prudent approach to our financing strategy in order to
place, underpinned by a Treasury Management Policy endorsed by the Pennon
ensure our funding requirements are fully met.
2, 3 Board. Stable
Failure to maintain funding requirements could lead to additional financing The impact of macro political, economic and regulatory risks on the Group's
costs and put our growth agenda at risk. Breach of covenants could result in financing commitments and cash flow, funding and covenant compliance is
the requirement to repay certain debt. regularly reviewed by the Group Executive and Pennon Board.
The Group retains £827 million of cash and committed facilities as at 31
March 2022. South West Water and Bristol Water are well funded for the 2020-25
regulatory period.
Since March 2021 the Group has signed £295 million of new and renewed
facilities at both Pennon and South West Water levels.
E: Non-compliance or occurrence of an avoidable health and safety incident(1)
Long-term priorities The effective management of health and safety risks continues to be a key Medium The Group has no appetite for health and safety related incidents and
priority for the Group Executive and Pennon Board. The review of health and
maintains the highest standards of compliance for our staff, contractors and
1, 2, 3 safety performance is monitored regularly through the dedicated Board and Stable other third parties.
Executive Health and Safety Committees.
A significant health and safety event could result in financial penalties,
significant legal costs and damage to the Group's reputation. The Group has continued to deliver and embed the HomeSafe strategy during the
year. Additionally, improvement plans and initiatives are being consolidated
within Bristol Water and a Bristol Water specific HomeSafe Plan will be
developed during 2022/23.
Investment has also been accelerated for safety specific asset improvements,
focused on operational sites and activities.
These measures have helped to contribute to the Group's lowest ever health and
safety score of 22 Lost Time Injuries. The Group has also set out the roadmap
to becoming leaders in health and safety in the water sector.
1. 2021/22 performance and target excludes Bristol Water - Actual LTIs
for Bristol was 10 giving a Pennon Group total of 32 for the year. Future
targets to 2025 includes Bristol Water.
F: Failure to pay all pension obligations as they fall due and increased costs
to the Group should the defined benefit pension scheme deficit increase
Long-term priorities The Group has in-house pensions expertise supplemented by external Low The Group will ensure that all obligations are met in full but seeks to manage
specialists, including professional advisors who manage the scheme's
this without unnecessary costs to the Group.
2 investment strategy. Stable
The Group could be called upon to increase funding to reduce the deficit, Following consultation, the Pennon Defined Benefit scheme was closed to future
impacting our cost base. accrual from 30 June 2021.
Following the disposal of Viridor, the Group has contributed £59 million over
and above the agreed deficit recovery payments from the 2019 actuarial
valuation.
As at 31 March 2022, there is a surplus of £66.3 million relating to the
Group's retirement obligations and the Pennon Group Pension Scheme is
approximately 105% funded against its technical provisions.
The 2022 triennial valuation is underway.
Market and economic conditions
G: Non-recovery of customer debt
Long-term priorities South West Water and Bristol Water have robust collection strategies which High While seeking to minimise non-recoverable debt, we recognise customer
have continued to adapt in response to the impact of COVID-19 and the
affordability challenges and the inability to disconnect domestic customers
1, 2 increasing inflationary environment on customers during the year. The Stable results in a residual risk of uncollectable debt remaining.
effectiveness of the measures taken have resulted in collection rates and debt
Reduced customer debt collection would adversely impact on the Group's levels at levels broadly comparable with prior year. Continued support has
revenue. also been provided to South West Water and Bristol Water customers most in
need by proactively promoting affordability measures and tariffs.
Similarly, Pennon Water Services' collection rates and debt levels have
remained robust and there has been proactive engagement with customers most
impacted by COVID-19 restrictions to provide tailored support, in line with
market code requirements.
Despite the effectiveness of mitigations in place, further increases in
inflation and the cost of living may result in future affordability challenges
for our customers.
H: Macro-economic near term risks impacting on inflation, interest rates and
power prices
Long-term priorities The volatility currently being experienced in the global economy is impacting High The Group seeks to take well-judged and informed decisions while ensuring
on the Group's near term cost base through increased operational costs, power
plans are in place to mitigate the potential impact of macroeconomic risks.
2, 3 prices and financing costs. Increasing
Lower inflation or deflation could adversely impact on the Group's revenue and Action is taken to mitigating these near term impacts through utilising the
significant changes in interest rates and power prices could increase the Group's in-house procurement function to drive value through competitive
Group's cost base. tendering, regularly review of the Group's debt portfolio and level of index
linked debt, monitoring of forward power prices to manage the exposure to
price volatility and increasing the level of renewable energy.
Despite these mitigations there remains a degree of exposure beyond the
Group's control.
Long-term protection from the increasing inflationary environment is provided
through inflation linked revenues and RCV growth, along with regulatory
true-ups.
Operating Performance
I: The Group's operations and assets are impacted as a result of climate
change and extreme weather events
Long-term priorities A low appetite remains amongst regulators and stakeholders for reduced Medium The Group seeks to mitigate the impact of climate change and extreme weather
performance arising from extreme weather and climate change.
events through long-term planning, forecasting and investment.
1, 3
Stable
The assessment of both transitional and physical climate change related risks
Failure of our operations to cope with short-term extreme weather or long-term on the Group's assets and operations has informed South West Water's Climate
implications of climate change may result in an inability to meet customer Change Adaptation Plan which was published in December 2021 and the Group's
needs, environmental impacts, increased costs and reputational damage. TCFD statement on pages 106 to 122.
Additionally, extensive water resource scenario planning has been undertaken
as part of the development of South West Water's updated 25 year Water
Management Plan, which will be published later in the year, and drought plans
are subject to regular review. Bristol Water's Water Resources Management Plan
was last published in 2019 and Drought Plan was published in 2022.
Proactive capital investment is undertaken on the Group's assets to ensure the
continued resilience of both water and wastewater assets, particularly those
located on or near flood plains or at risk of rising sea levels and coastal
erosion. Additionally the CREWW venture with the University of Exeter was
launched during the year which will consider the impact of climate change in
delivering resilient water supplies.
The Group is also minimizing its environmental and climate change impact
through the delivery of its 2030 Net Zero and WaterFit plans.
J: Failure of operational water treatment assets and processes resulting in an
inability to produce or supply clean drinking water
Long-term priorities Whilst the region continues to experience high levels of demand, water Medium The Group operates a low tolerance for significant operational failure of its
resources have remained resilient during the year and are in a robust position
water treatment assets and seeks to mitigate these risks where possible.
1, 3 ahead of the summer period. The Group also seeks strategic value enhancing Stable
opportunities and has procured a site for the development of a new reservoir
An inability to produce or supply clean drinking water could result in in the region.
financial penalties, regulatory enforcement and damage to the Group's
reputation. Asset health is managed through a well-established programme of planned and
preventative maintenance works which has continued to assist in delivering
further improvements within the Group's drinking water operations.
In the event of a significant incident detailed contingency plans and incident
management procedures are maintained which are regularly reviewed.
K: Failure of operational wastewater assets and processes resulting in an
inability to remove and treat wastewater and potential environmental impacts,
including pollutions
Long-term priorities Minimising the impact of our activities on the environment is a strategic High The Group operates a low tolerance for significant operational failure of its
priority for the Pennon Board and Executive.
wastewater processes and assets and maintains the highest level of
1, 3
Stable environmental standards.
The continued delivery of South West Water's Pollution Incident Reduction Plan
An inability to remove or treat wastewater could result in adverse environment has resulted in one-third less pollutions compared with the previous year.
impacts, financial penalties, regulatory enforcement and damage to the Group's This has been achieved through continued asset investment and maintenance,
reputation. enhancing our systems and processes, collaborating with others in the industry
to share best practice, helping customers to understand how their behaviour
impacts on the local environment and a focus on culture, training, and
standards with our workforce.
It is recognised, however, that there is more to do to deliver the desired
step change in this area.
The Group's WaterFit investment programme will deliver £330 million of
investment focused on protecting and improving the quality of the region's
rivers and seas. Further detail is provided on page 42.
L: Failure to maintain excellent service or effectively engage with our
customers and wider stakeholders
Long-term priorities The Group continues to invest in its customer services teams and expand the Medium The Group continually seeks
channels by which it can interact with and support customers. Both South West
1 Water and Bristol Water hold the Institute of Customer Service's ServiceMark Increasing to engage with and increase customer and wider stakeholder satisfaction
accreditation. Additionally, South West Water is BSI18477 accredited, a levels.
Failure to maintain an adequate level of service and engagement could lead to dedicated standard for identifying and responding to customer vulnerability.
financial penalties for South West Water, the inability of Pennon Water
Services to retain and grow market share and damage to the Group's reputation. While written complaints have decreased by 60% in South West Water, C-MeX
performance is not where we would like it to be and action is underway to
address this. Bristol Water's written complaints have halved during the year
and were ranked sixth in the industry for C-MeX performance.
Pennon Water Services continues to maintain high customer satisfaction scores,
including a rating of 4.85 out of 5 on Trustpilot.
The independent WaterShare+ advisory panel acts as a key mechanism for
engaging and demonstrating to customers how South West Water is delivering on
its business plan and Board pledges. During the year the first WaterShare+ AGM
was held.
The Group regularly engages with a wide variety of internal and external
stakeholders including our people, customers, regulators, environmental
stakeholders and our supply chain. During the year and extensive stakeholder
engagement process was undertaken and the outcomes have been aligned with the
Group's ESG Capitals framework. Further detail is on page 31.
M: Insufficient skills and resources to meet the current and future business
needs and deliver the Group's strategic priorities
Long-term priorities There remains high demand nationally for skills and experiences utilised Medium While a certain level of employee turnover is desirable, we ensure the
across the Group. The acquisition of Bristol Water has further enhanced the
appropriate skills and experience are in place with succession plans providing
1, 2, 3 skills and talent available across the Group. During the year senior leaders Stable adequate resilience.
from across the Group have participated in a talent development programme and
Failure to have a workforce of skilled and motivated individuals will Bristol Water's future leaders programme.
detrimentally impact all of our strategic priorities. We need the right people
in the right places to innovate, share best practice, deliver synergies and The Group's HR strategy enables the Group to attract, retain and develop our
move the Group forward. employees and a number of reward and recognition initiatives have been
launched during the year reflecting the significant contribution that our
people make.
During the year the Group has recruited a further 28 graduates, 136
apprentices and offered 54 placements through the Kickstart programme and 13
placements through the Black Intern initiative.
The employee engagement forum has been refreshed during the year and nine new
employee networks have been launched.
The continued impact of the Group's Employee Benefits and Reward Strategy, a
focus on talent management and prioritisation of the Group's diversity and
inclusion agenda has again resulted in Pennon being an accredited Great Place
to Work for a second year running.
N: Non-delivery of regulatory outcomes and performance commitments
Long-term priorities The delivery of our regulatory outcomes and performance commitments is Medium The Group is committed to achieving all performance commitments over the
principally through our operational activities and initiatives.
length of each regulatory period. Where performance in an individual year
1, 2, 3
Stable falls below expectations, action plans and targeted intervention are
Performance against South West Water and Bristol Water's ODIs is subject to implemented to ensure performance returns to committed levels.
South West Water's regulatory outcomes and performance commitments cover key regular scrutiny and review by both the Executive and the Board. This is
strategic focus areas. supplemented by a comprehensive programme of internal and external assurance
over reported performance.
Non-delivery against these could result in financial penalties being applied
as well as reputational damage to the Group. Approximately 80% of South West Water's and 75% of Bristol Water's ODIs are on
track or ahead of target.
Business systems and capital investment
O: Inefficient or ineffective delivery of capital projects
Long-term priorities Capital projects are subject to an established and robust business case Medium The Board has a low-risk appetite for risk associated with the delivery of
process which includes challenge and modelling of key assumptions. Projects
capital investment within our regulated business plan.
1, 3 are delivered utilizing skilled project management resource with Executive Stable
level oversight.
Inability to successfully deliver on our capital programme may result in
increased costs and delays, detrimentally impacting our ability to provide top The delivery of projects during the currently regulatory period, including as
class customer service and achieve our growth agenda. part of South West Water's Green Recovery Initiative, are progressing.
The current volatility in the global economy is placing additional challenges
on the Group's supply chain through reducing availability of goods and
materials , increased costs and skills shortages.
The Group works closely and regularly engages with its supply chain as well as
monitoring the financial health of key partners. Established plans and
alternative arrangements provide mitigation and early intervention where
necessary.
P: Inadequate technological security results in a breach of the Group's
assets, systems and data
Long-term priorities External threats to the Group's assets and systems remain heightened, Medium The Group seeks to minimise technology and security risk to the lowest
particularly due to the war in Ukraine. External threats, including additional
possible level without detrimentally impacting on the Group's operations.
1 risks resulting from the current conflict in Ukraine, are being regularly Stable
monitored by the Group's information security teams.
Failure of our technology security, due to inadequate internal processes or
external cyber threats, could result in the business being unable to operate The Group maintains a strong preventive and detective information security
effectively and the corruption or loss of data. This could have a detrimental framework, aligned to guidance issued by the National Cyber Security Centre.
impact on our customers and result in financial penalties and reputational
damage to the Group. A refreshed information security awareness programme has been launched during
the year and South West Water continues to hold the ISO27001 accreditation.
During the year both South West Water and Bristol Water have continued to
implement improvements as part of the roadmap to meet the requirements of the
Network and Information Systems Directive (NIS), with activities aligned to
the priorities identified by the Drinking Water Inspectorate.
Disaster recovery plans are in place for both corporate and operational
technology and are regularly reviewed.
Q: Failure to fully realise the strategic value arising from the acquisition
of Bristol Water
Long-term priorities Following the clearance of the Bristol Water merger by the CMA, integration Low stable Opportunities that support the Group's strategic priorities are assessed
planning has commenced focused on highlighting and adopting best practices against an expected level of return adopting clearly defined factors and
3 from across the enlarged Group. metrics.
The inability to effectively integrate the acquired business could result in a Synergies of c.£20 million per annum by 2024/25 have been identified through
failure to maximise the value of this transaction, impacting on shareholder service improvements, supply chain efficiencies, creating common systems and
return. processes and sharing of vest practice.
The delivery of the integration programme includes Executive involvement with
oversight by the Pennon Board.
Statement of Directors' responsibilities
(This statement is extracted from the governance section of the Annual Report
2022 and page numbers referred to are those in the Annual Report 2022.)
The Directors are responsible for preparing the annual report and the Group
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the Group
and parent company financial statements in accordance with UK adopted
international accounting standards (IFRSs) in conformity with the Companies
Act 2006. Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and the Company and of the profit or loss of
the Group for the year.
In preparing these financial statements the Directors are required to:
· select suitable accounting policies in accordance with IAS 8 Accounting
Policies, Changes in Estimates and Errors and then apply them consistently;
· make judgments and accounting estimates that are reasonable and prudent;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements of IFRSs is insufficient to enable users to understand the impact
of particular transactions, other events and conditions of the Group's
financial position and financial performance;
· in respect of the Group financial statements, state whether UK adopted
international accounting standards in conformity with the Companies Act 2006
have been followed, subject to any material departures disclosed and explained
in the financial statements;
· in respect of the parent company financial statements, state whether UK
adopted international accounting standards in conformity with the Companies
Act 2006 have been followed; and
· prepare the financial statements on the going concern basis unless it is
appropriate to presume that the Company and/or Group will not continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's and Group's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and the Company; and enable them to ensure that the Company and Group
financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and the Company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities. Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement that comply
with the law and those regulations. The Directors are responsible for the
maintenance and integrity of the corporate and financial information included
on the Company's website.
Each of the Directors, whose names and functions are listed on pages 130 and
132, confirms that, to the best of his or her knowledge:
· The consolidated financial statements, prepared in accordance with UK
adopted international accounting standards in conformity with the Companies
Act 2006 give a true and fair view of the assets, liabilities, financial
position and profit of the parent company and undertakings included in the
consolidation taken as a whole.
· The Annual Report, including the Strategic Report (pages 1 to 125),
includes a fair review of the development and performance of the business
during the year and the position of the Company and undertakings included in
the consolidation taken as a whole, together with a description of the
principal risks and uncertainties they face.
· They consider that the Annual Report, taken as a whole, is fair, balanced
and understandable, and provides the information necessary for shareholders to
assess the Company's position, performance, business model and strategy.
Related party transactions
(The following is Note 43 to the Financial Statements set out in the Annual
Report 2022.)
Group companies entered into the following transactions with joint ventures
which were not members of the Group. Transactions listed below with INEOS
Runcorn (TPS) Limited and Lakeside Energy from Waste Limited related to
Viridor and were reported as part of discontinued operations in 2021. Bristol
Wessex Billing Services Limited and Water 2 Business Limited are joint venture
investments of Bristol Water plc.
2022 2021
£m £m
Sales of goods and services
INEOS Runcorn (TPS) Limited - 3.5
Water 2 Business Limited 14.5 -
Purchase of goods and services
Lakeside Energy from Waste Limited - 3.8
INEOS Runcorn (TPS) Limited - 2.2
Bristol Wessex Billing Services Limited 2.4 -
Year-end balances
2022 2021
£m £m
Receivables due from related parties
Water 2 Business Limited (including loan receivable of £9.6 million) 11.1 -
Bristol Wessex Billing Services Limited 0.9 -
Payables due to related parties
Water 2 Business Limited 0.4 -
Bristol Wessex Billing Services Limited 1.4 -
The receivables due from related parties are unsecured and will be settled in
cash. No guarantees have been given or received. No provisions have been made,
or are considered necessary, for doubtful debts in respect of these amounts
due.
The loans to Water 2 Business Limited are due to be repaid on 28 February 2023
and carry interest at LIBOR plus 1.75%.
Company
The following transactions with subsidiary undertakings occurred in the year:
2022 2021
£m £m
Sales of goods and services (management fees) 9.0 10.5
Purchase of goods and services (support services) 0.5 3.3
Interest receivable 1.3 4.7
Dividends received 94.5 101.6
Sales of goods and services to subsidiary undertakings are at cost. Purchases
of goods and services from subsidiary undertakings are under normal commercial
terms and conditions which would also be available to unrelated third parties.
Year-end balances
2022 2021
£m £m
Receivables due from subsidiary undertakings
Loans 31.5 26.1
Trading balances and other receivables 48.2 59.9
£26.1 million of the loan balance is due for repayment in instalments over a
five-year period following a receipt of a request to repay. No request to
repay has been issued at the current time. Interest on £13.1 million (2021
£13.1 million) of the loans has been charged at a fixed rate of 5%. Interest
on £13.0 million (2021 £13.0 million) of the loans has been charged at
12-month LIBOR +3.0%.
The remaining loan receivable of £5.4 million is with Bristol Water Holdings
UK Limited (BWHUK). As part of the acquisition of the Bristol Water Group,
Pennon Group plc acquired a loan receivable from BWHUK with a principal
repayable of £5.5 million. This loan receivable is due for repayment on
31 December 2023 and the rate of interest charged on the amount outstanding is
0%. Under the requirements of IFRS9 the fair value of the loan is recognised
using the rate of 3.565% (comprising an indicative market rate of 0.765% and a
margin of 2.8%). The difference between the fair value and
the notional value is amortised over the remaining term of the loan with the
effective interest being charged to the income statement.
No material expected credit loss provision has been recognised in respect of
loans to subsidiaries (2021 nil).
2022 2021
£m £m
Payables due to subsidiary undertakings
Loans 282.8 283.4
Trading balances 8.6 8.6
The loans from subsidiary undertakings are unsecured and interest-free without
any terms for repayment.
20 June 2022
www.pennon-group.co.uk
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