UK water companies see decreased investment risks after regulator decision, creating buying opportunity for investors

From Investing.com: 2025-01-15 04:34:41

Analysts at Morgan Stanley believe investment risks for UK water companies have decreased significantly following a regulatory decision allowing for a 36% increase in water bills over five years. Severn Trent and United Utilities are recommended as top picks, with stock prices down 7% and 8% respectively in the past year. Ofwat has granted companies the opportunity to invest £104 billion in infrastructure improvements.

The decision by Ofwat to increase water bills has created a unique buying opportunity for investors, with average bills set to rise by £31 per year for customers. Despite recent scrutiny over sewage dumping, private water companies have been given the green light to invest in reservoirs and pipelines. Ofwat aims to balance low bills with the need for industry upgrades, prompting debate over funding sources.

Morgan Stanley analysts view the regulatory decision as a positive step for UK water companies, providing revenue visibility and capex allowances for the next five years. Despite concerns over neglecting infrastructure investments, the sector sees this as a de-risking event with potential for growth. Shares in Severn Trent and United Utilities present attractive opportunities for investors.



Read more at Investing.com: UK water sector “materially de-risked” after regulator decision