23 November 2012

Pennon Group's subsidiary, South West Water, has notified Ofwat, along with the majority of the other water companies, that it is unable to accept the proposed changes to its operating Licence conditions set out in the Section 13 Notice from Ofwat dated 26 October 2012.

Whilst we support the need to make Licence changes for the next price review process in 2014 to find new and more innovative ways to deliver sustainable water and sewerage services it is believed that the Licence proposals set out by Ofwat in the Notice are not in the long term interests of customers and are insufficient to maintain investor confidence.

We welcome Ofwat's latest statement to the industry which clarifies some of the Section 13 Notice proposals.  Whilst we have not been able to consent to the proposals we have responded to Ofwat constructively on our concerns and how these can be addressed. South West Water looks forward to continuing discussions with Ofwat to achieve a mutually acceptable conclusion which will protect the interests of our investors and South West Water customers.

Pennon Group will announce its Half-Year Results to 30 September 2012 on Thursday 29 November 2012.