Pennon PLC (LON:PNN) said it has negotiated a reset to its waste recycling contract with the Greater Manchester Waste Disposal Authority (GMWDA) as it reported an increase in first half revenues and profits.
The GMWDA wants to terminate its 25-year private finance initiative deal with Viridor Laing Greater Manchester (VLGM) - a joint venture between Pennon’s Viridor subsidiary and John Laing - to recycle waste and use some of it as fuel to generate electricity.
As part of the contract exit, GMWDA bought VLGM at the end of September.
Pennon said the GMWDA, which signed the PFI deal in 2009, has agreed to a reset of the contract whereby it has repaid all external debt loaned into Viridor Laing and the TPSCo joint venture between Viridor, John Laing and Inovyn.
The TPSCo joint venture remains in place.
Revenue up, dividend raised
Pennon reported a 5.6% increase in underlying revenue to £723.9mln in the six months to 30 September 2017, boosted by an increase in demand for water and a strong performance from its energy recovery facilities. Pre-tax profit edged up 2.3% to £131.1mln on an underlying basis.
The water utility and waste management company raised its dividend by 7.9% to 11.79p each.
Chief executive Chris Loughlin said good progress has been made to bring Viridor's remaining four energy recovery facilities in the portfolio on stream, with three in commissioning in fiscal year 2017/18 and the final facility under construction.
“The expansion of Viridor's energy recovery facility portfolio will support Pennon's earnings growth to 2020 and beyond,” he said.
The group is on track to meet cost savings and synergy targets of £17mln per year from 2019 and the run rate is already at £11mln per year.
Shares rose 1.45% to 806.50p in morning trading.