Pennon Group PLC (LON:PNN) said it is still seeking acquisitions as it expects to end the financial year with more than £3bn of cash.
Describing itself as an environmental infrastructure group since the £3.7bn disposal of waste unit Viridor, Pennon said in its half-year results it had significant funds available and was working extensively to work out what to do with it.
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On Tuesday it reiterated it believes there is significant value potential from the reinvestment of the Viridor sale proceeds in the UK water sector and continues to narrow down its review of potential growth opportunities.
If it doesn't find a suitable investment opportunity, the utility giant expects to make a "substantial" return of capital to shareholders.
So far, £1bn has been used to de-gear, leaving £200mln of gross debt, while £36mln has been paid into pensions.
Meanwhile, the South West Water arm is expected to double base returns on regulated equity (RORE) to 3.9%.
During the second half of the year, it saw a net increase in demand and associated revenues which offset a decline in non-household demand driven by COVID-19 related restrictions, although operational costs have spiked.
South West Water also partially offset reduced demand by growing its customer base with £20mln annualised new contract wins secured during the year.
The FTSE 100 said the subsidiary is achieving its target for supply interruptions two years ahead of plan and in waste it is ahead of its target for both internal and external sewer flooding.
It also improved biodiversity in 20,000 hectares through partnerships with local groups.
However, it expects to earn penalties from Ofwat in the year to March 31 based on pollution targets.
Recent data shows that in terms of environmental pollution, Pennon’s South West Water was the second worst performing company, with 105 pollution incidents per every 10,000km of sewer, as well as releasing raw sewage into rivers more than 36,000 times last year.
Pennon is raising funds for South West Water through the Sustainable Financing Framework, with a further £90mln this year, which includes South West Water's first ever green private placement for £60mln.
Total funds raised so far under the programme are over £900mln.
South West Water's Green Recovery Initiative could see investment to 2025 increase £92mln, with six projects focused on improving public health, protecting the environment and addressing climate change.
This investment would result in a 3% regulatory capital value (RCV) increase and the creation of up to 500 additional jobs across the region.