South West Water (SWW) owner Pennon Group warned of a profit hit from a household bill freeze, but said strong financial performance was continuing and it expects to hit its regulatory targets for 2010-15.

Pennon said an already announced decision to keep tariffs unchanged in 2014/15 would affect the year's profits.

But it said it had already included the resulting loss of revenue in its draft determination for the 2015-2020 regulatory period on a net present value-neutral basis.

SWW will be able to speed up several key projects such as bathing water improvements following early receipt of its draft determination for 2015/20 in April this year.

The group, which also owns Viridor, said the waste business was continuing to turn itself from a landfill operator into a recycling, renewable energy and waste management company.

It said Viridor's first half 2014/15 pre-tax earnings before interest, amortisation and depreciation (EBITDA) would be materially lower than a year ago.

But it said the division's full-year EBITDA would top that of 2013/14 due to the entry into service of five energy recovery plants this year.

Year-to-date performance has primarily been hit by the expected continuation of the decline of the landfill business. Also, as expected, landfill gas generation fell from its peak and the recycling business has been moderately affected by near-term weakness in recycling prices.

Since 1 April Pennon had secured/renewed £205m funding comprising and had converted all of the £125m convertible bonds due this year, resulting in the issuance of 20,908,635 Pennon shares.

PW

Related share prices
Pennon Group (PNN) share price