South East Water needs fresh cash from investors to continue operating

South East Water has said it needs a cash injection from investors to stay afloat as it gears up for a key Ofwat ruling on its future spending plans.

The struggling water firm, which serves 2.3 million people across Kent, Sussex and Surrey, said it is “in discussions with lenders and shareholders regarding additional liquidity”.

The talks are at an “advanced” stage and bosses “expect” to raise the extra funding, but the company has not struck a deal on the investment.

“If it is not possible to raise the additional liquidity, the group and therefore company would not have sufficient liquidity for the going concern period,” it said in a results statement on Wednesday.

It added that “the risk that the funding will not be received constitutes a material uncertainty that may cast significant doubt on the ability of the group and company to continue as a going concern”.

South East Water is already on regulator Ofwat’s watch-list for financially at-risk companies, alongside Thames Water and other regional monopolies.

The company’s financial update will be followed on Thursday by a draft verdict from Ofwat on water companies’ five-year spending plans and bill increases to 2030.

That will kick off six months of negotiations with Ofwat, ahead of its final decision in December.

South East Water has put forward plans that would see spending rise to £1.9 billion to maintain and update its infrastructure. However, that would also involve increasing customer bills by 22%.

The search for funding comes after South East Water’s owners provided a £150 million loan to a unit in the utility group earlier this year.

South East Water’s pre-tax loss narrowed to £36 million for the year to March 31, down from £74 million the year before. Turnover ticked up 9% to £281 million.

It is also still under investigation by Ofwat for an incident in June 2023 when the company failed to deliver water to thousands of customers for more than a week.

The consequences could include a hefty fine from the regulator.

South East Water said: “Since the investigation was launched, we have entered into a constructive and transparent dialogue with Ofwat.

“Our colleagues, contractors, partners and stakeholders have all played a vital role in ensuring we kept the taps flowing for as many customers as possible, even during the extreme weather which impacted on our operations and overall performance in 2023/24.

“Despite all our efforts, there were still some issues during the year and we’d like to apologise to customers who experienced any supply interruptions.”