South East Water has warned that it needs a cash injection from investors to stay afloat as it prepares for a key Ofwat ruling on its future spending plans.
The news comes after debt-laden Thames Water said earlier this week that it only has enough cash to fund its operations until the end of May next year
South East Water, 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.
Meanwhile, Thames Water, the UK’s largest water company, is facing questions over whether it can survive. It said on Tuesday that its debts had risen to £15.2bn in the year to March and that efforts to raise new money are continuing.
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 £1.9bn to maintain and update its infrastructure. However, that would also involve increasing customer bills by 22 per cent.
The search for funding comes after South East Water’s owners provided a £150m loan to a unit in the utility group earlier this year.
South East Water’s pre-tax loss fell by almost half to £36m compared to the previous year’s £74m. Turnover ticked up 9 per cent to £281m.
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.”
Additional reporting from PA