In a trading update, the FTSE 250-listed firm said it had previously booked an £8mln provision of related to its exposure to Interserve, but this has now been doubled.
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The company added that it "is seeking further clarification" on Interserve's situation, following its move into pre-pack administration earlier this month, meaning the provision could increase.
It said: “We will continue to pursue recovery of all amounts due from the operating subsidiary Interserve Construction Ltd and will take all the necessary legal and procedural steps to achieve this.”
Pennon noted that its South West Water business continues to perform strongly, with its return on retained earnings expected around 12%, an outperformance.
The company said revenue for the current year is guided to "broadly" offset operational costs.
It said its waste arm Viridor's energy recovery facilities at Glasgow, Beddington, and Dunbar are all also performing well, and it is confident its recycling business will meet full-year expectations.
The group will release its results for the year ending 31 March 2019 on 30 May.