Yorkshire Water pays out £62m in dividends after sharp rise in profits

Yorkshire Water has announced it paid more than £60m in dividends to its parent companies last year after reporting a significant increase in profits.

The company recorded a statutory profit of £544m in 2022/23, after a loss of £368.6m in the previous year.

Its annual report said £62.3m in dividends were paid to other companies in the Kelda Group, to help cover interest payments on loans taken out on behalf of Yorkshire Water, and no money went to external shareholders.

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Yorkshire Water is part of Kelda Group, which is run by Kelda Holdings Limited. Shareholders in the Jersey-based parent company include Singapore’s sovereign wealth fund GIC and Australia’s SAS Trustee Corporation.

Yorkshire Water is facing questions about its finances.Yorkshire Water is facing questions about its finances.
Yorkshire Water is facing questions about its finances.

Earlier this month, the finances of England’s debt-laden water companies were put under the spotlight when concerns were raised about the future of Thames Water, as it has been struggling to service a £14bn debt pile.

There are fears the companies, which collectively hold £60bn of debt, are not generating enough profit to pay off their loans and prioritising dividends over infrastructure investment.

Yorkshire Water has claimed it is shoring up its finances, after raising more than £500m from shareholders and a further £700m by issuing bonds.

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The company reported a net debt of £6.1bn in 2022/23, when the amount it spent on covering interest payments on various loans rose to £427.6m (up from £281.9m).

Yorkshire Water Chief Executive Nicola ShawYorkshire Water Chief Executive Nicola Shaw
Yorkshire Water Chief Executive Nicola Shaw

It said the increase was “a result of higher inflation” and most of the money (£360.9m) is being paid to cover interest on loans from other companies in the Kelda Group.

According to the company's report, revenue increased by £26.2m in 2022/23 due to “inflationary price increases” but it also “experienced some significant cost pressures”.

Responding to the county’s first drought in 25 years cost the company £25m, as it had to lay a network of temporary pipes to pump water into depleted reservoirs.

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In its report, Yorkshire Water also said a growing number of customers are struggling to pay their bills during the cost-of-living crisis but it has committed £115m for various support schemes.

It comes after the water regulator Ofwat warned that water companies will probably look to increase bills from 2025 to fund large investment programmes.

Chief Executive Nicola Shaw said: “It’s certainly been a challenging year for Yorkshire Water in part due to the extreme weather events we faced but also external factors such as cost increases on chemicals and energy impacting our finances.

“I’m proud that over the course of the year we’ve continued to significantly strengthen our financial position alongside investing £500m in Yorkshire’s infrastructure to improve drinking water quality, upgrade wastewater treatment works as well as maintain our reservoirs.

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"Our shareholders have been continuing to showcase their support for the company and have funded £15m for additional financial support schemes for customers who are struggling to pay their bills; £100m to reduce discharges into Yorkshire’s rivers; £13m to reduce the impact of storm overflows in Ilkley and £400m to increase the company’s financial resilience by repaying loans.

“However, we know we have more to do to continue to improve our performance as customers expect more of us, particularly in how we improve the health of our rivers and coastal waters.”

Last year, Yorkshire Water's shareholders promised to provide £100m that will be invested in a project that aims to reduce sewage discharges from storm overflows by 20 per cent by April 2025.

The investment was announced after Ofwat agreed to close an investigation it had launched into two loans Yorkshire Water had provided to Kelda Eurobond Co Limited, which is another company in the Kelda Group.

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The regulator said Yorkshire Water, owed more than £940m, agreed to recover the money by March 2027 and make “a series of additional commitments” to cut sewage spills and shore up its finances.

The company discharged sewage times in 2022 – down from 70,062 the previous year – to relieve pressure on the sewage network following periods of heavy rain.

The Environment Agency said the decrease was “largely down to dry weather”.