Ofwat‘s Draft Determination (DD) for the water companies for the next five years is published on 11th July, notes Citi and poses a high regulatory risk for the utilities.
DD will be the first regulatory event for the sector under the new Labour government, adds the bak, whose leaders (Keir Starmer PM and Steve Reed DEFRA) have made no secret of their desire to put the sector into "special measures".
Citi points to Labour's Water Quality Bill, tabled in the House of Commons 2023, and supported by Liberal Democrats, but ultimately rejected by Conservatives.
“We see a risk of this bill resurfacing, and concerned with reference of ‘failure to improve is paid for by eroding dividend’.
“In our view, DD alone will not provide clarity for the sector and remain cautious.”