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JP Morgan turns the tap back on as it reinstates coverage of water sector

Last updated: 07:44 05 Dec 2014 GMT, First published: 08:44 05 Dec 2014 GMT

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JP Morgan has taken a closer look at the quoted water firms ahead of the final price determination by the regulator next week.

The investment bank believes the watchdog Ofwat will agree an “attractive” retail price inflation price link that “provides the opportunity for both financing and operational outperformance”.

At the same time JPM is suggesting the removal of regulatory uncertainty may herald takeovers and mergers in the sector.

“We include a 60% probability of M&A in our price targets,” it said in a note to clients.

The house reinstated coverage of United Utilities (LON:UU.) and Severn Tent (LON:SVT) with ‘overweight’ recommendations, while Pennon (LON:PNN) is rated ‘neutral’.

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