Shares of Pennon were up 1.4 percent at 821 pence at 0839 GMT on Friday on the London Stock Exchange.

Despite a lacklustre performance and concerns around regulatory reviews, utility shares had risen after Britain's historic vote to leave the European Union drove investors to defensive stocks such as utility companies, which are seen as "bond-proxies" due to their regular and high returns.

The UK water sector would be stable over the next 12-18 months as companies have good visibility over revenues up to 2020, Moody's said in a note last month.

Pennon joins other utilities which have increased their regulated tariffs to customers, while they brace themselves against a possible risk of interest rates going up on borrowing from future potential regulatory changes that could hurt its dividend policy.

The Water Services Regulation Authority (Ofwat) has suggested that water supply and waste management companies in the UK operate more efficiently by trading water supplies and extracting useful energy from sewage, pushing these companies to invest more in recycling and renewable energy sources.

Pennon Group said on Friday that it has increased its investment in its Avonmouth energy recovery facility to 252 million pounds, and added it was confident that the facility would be able to harvest power from the excess waste material available in the region.

The company, which supplies water across Devon, Cornwall and Dorset through its South West Water unit, said underlying pretax profit rose to 97 million pounds ($120.84 million) in the six months ended Sept. 30, from 87 million pounds a year earlier. Revenue fell 0.5 percent to 685.5 million pounds.

The company also raised its cost-savings target to 17 million pounds a year from 2019, up from 11 million pounds earlier.

($1 = 0.8027 pounds)

(Reporting by Vidya L Nathan and Sanjeeban Sarkar in Bengaluru, Editing by Sunil Nair)