U.K. Water M&A More Likely After Ofwat Decision Next Week: JPM
- U.K. water companies’ new PTs include 60% probability of M&A, says JPMorgan.
- Ofwat determinations due next Friday should offer inflation-linked regulation, allow for financing and operational outperformance
- Regulatory clarity to “clear the pipe” for M&A
- See 14% upside to United Utilities (reinstated overweight), 10% to Severn Trent (reinstated overweight) and 3% downside to PNN (reinstated neutral)
- Takeout valuations give 29% upside to UU, 26% upside to SVT
- Would sell SSE (UW) and buy into UK Water: JPM
- NOTE: Ofwat final draft determinations on water and wastewater charges due Dec. 12. Link to Aug. draft determinations