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Water industry getting riskier for investors

News

THE RISK profiles of water and sewerage companies are increasing, an investor survey by water industry body Water UK has revealed.

The Investor Survey 2004 cites increasing levels of debt on company balance sheets, lower credit ratings and the reduction of scope for efficiency gains as reasons for the risk increase.

The survey was carried out by financial advisory group Ecofin and was compiled on the basis of one to one interviews held in January with 40 debt and equity investors and ratings agencies.

'Most respondents believe the overall risk profile of companies is higher than it was in 1999, ' says the report. 'In addition investors are concerned that there may not be the political will to allow prices to increase enough to reflect the cost of the sector's future financing requirements.'

However investors are impressed with the increasing transparency of regulation and many still see the industry as being low risk compared to other utilities.

'It is still an attractive sector for investors, ' said a Water UK spokesman.

The study also found that investors would like to see the review period lengthened to between seven and 10 years.

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