Increases in the Regulated Capital Value (RCV) are good news for shareholders, who see increasing returns on their investment but bad news for customers who only see rises in their water bills.
Ofwat has just released the latest RCV updates. These show that the three water companies achieving the highest increases in RCV are Thames Water (9.16%), Southern Water (4.32%) and Yorkshire Water (3.51%). These water companies are all now owned by institutional investors. By contrast the water utilities with the lowest increase are all in public ownership, Severn Trent Water (0.44%), South West Water (0.96%) and not for profit company Welsh Water (1.16%). This does imply that privately owned companies have a more aggressive approach to driving up the regulated capital value.
It also helps to explain why water utilities are so attractive to long term investors like pension companies. With returns on investment above 10% for the best performing plus a risk free investment its no wonder pension companies have been flocking to buy into water companies.
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