Pennon cheered by waste division

The water utility needs Viridor to keep moving forward to meet its dividend commitments after it was forced to accept a real-terms cut in water bills in the latest regulatory period to 2015.

Pennon has pledged to increase its dividend payment to shareholders by 4 per cent a year between 2010/11 and at least 2014/15.

In a brief trading update, Pennon said South West Water had a “solid platform” to meet its regulatory requirements. It added that it is “highly unlikely” there will be any water restrictions this year despite the dry spring.

Viridor, meanwhile, “continues to perform well and the group is confident it will grow profits this year”, it said.

The subsidiary, which last year increased its pre-tax profits by 14.2 per cent to £62.9m, has decided in principle to go ahead with a 350,000 tonnes energy from waste (EfW) plant in Cardiff after receiving planning permission for the development earlier this year.

In July, the group signed a contract with Devon Council for treating 60,000 tonnes of waste at Exeter and EfW is a key part of Viridor’s plans going forward.

Broker Goldman Sachs has downgraded its stance on the whole water sector on the grounds share prices have become too expensive.

The broker says the sector held up much better than others during the recent market turbulence, but could lose ground if a recovery comes though next year.