The report, revealed exclusively to Utility Week, shows that 100% of shareholders and banks and 84% of bondholders believe regulatory risk has increased since the last price review in 2009. The majority of investor types said the PR14 process was “worse than PR09”.
The survey also highlighted unease about the attempted Section 13 license modification, with the majority of investors (90% of listed equity holders, 94% of unlisted equity holders, 57% of banks and 53% of bondholders) saying the process had made the sector less attractive.
However, the survey showed that the UK water sector remains an extremely attractive investment compared to other classes, with a majority of bondholders and banks, 47% of unlisted shareholders and 40% of listed shareholders reporting increased weighting in the sector since 2009.
The report’s author, Indepen consultant John Hargreaves, said: “At the high level, most of the investors answered that global developments left the water sector looking rather more attractive. You can contrast that high level picture with concerns about policy and the way it’s developed- the net result is that it’s still rather attractive and the investors quite like it.”
Other concerns included the recently published PR145 methodology, which 80% of listed equity holders said had made the sector less attractive. Substantial proportions of banks (43%) and bond holders (41%) said they did not have enough information to say.
The survey highlighted how water must compete with other investment classes, with the majority of all investors rating water as “as risky” or “riskier” than electricity transmission, gas transmission and gas distribution.