United Utilities acceptance of final determination and dividend policy update

On 12 December 2014, Ofwat published its final determination of price controls for United Utilities Water Limited (UUW) covering the period 1 April 2015 to 31 March 2020. United Utilities Group PLC (UUG) today announces that, after careful consideration, its subsidiary, UUW, has decided to accept the final determination.

This determination delivers value for all of our stakeholders, with a strong focus on customer benefits, including reduced bills in 2015/16, alongside continued high levels of investment which will provide further environmental benefits and a significant contribution to the regional economy. Household customers are also set to benefit from below inflation growth in average bills for the decade through to 2020.

Operational performance and customer service

We have delivered significant operational and customer service improvements over the last four years and the business enters the 2015-20 regulatory period underpinned by a strong platform of sustainable performance.

This next regulatory period places more emphasis on companies’ operational performance and we will continue with our strong focus in this area. Although this is a challenging price control, we are confident that, with the plans we have in place, we can maintain and improve services for customers and provide an appropriate return for our investors.

Capital structure

We aim to maintain efficient access to debt capital markets throughout the economic cycle. The UUG board therefore believes that it is appropriate to keep gearing, measured as net debt to regulatory capital value, within our existing target range of 55% to 65%.

Credit ratings targets

Assuming no significant changes to existing rating agencies’ methodologies or sector risk assessments, the group aims to maintain, as a minimum, its existing credit ratings of A3 with Moody’s and BBB+ with Standard & Poor’s for UUW and debt issued by its financing subsidiary, United Utilities Water Finance PLC.

Dividend policy

In line with the group’s existing policy for AMP5, the expected total dividend per ordinary share for 2014/15 is 37.7 pence. In respect of its AMP6 dividend policy, the UUG board announces that the group will target growth in the dividend per share, from the 2014/15 base, of at least RPI inflation each year through to 2019/20. This target reflects detailed analysis and assessment of the final determination, including the lower allowed regulatory return for AMP6.

The UUG board believes that this represents an appropriate balance, recognising the challenges of the final determination, the importance of income to shareholders and the need for United Utilities, in the interests of all stakeholders, to retain a robust and sustainable financial profile.

United Utilities intends to provide further details of its plans and initiatives for the forthcoming regulatory period at its full-year results on 21 May 2015.

United Utilities contacts

For further information on the day, please contact:

Gaynor Kenyon – Corporate Affairs Director +44 (0) 7753 622282
Darren Jameson – Head of Investor Relations +44 (0) 1925 237033
Peter Hewer / Martin Pengelley – Tulchan Communications +44 (0) 20 7353 4200

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