Press release
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RNS Number : 9615XPennon Group PLC07 October 2026 THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION. FOR IMMEDIATE RELEASE. 7 October 2026 PENNON GROUP PLC Strategic update, launch of rights issueto support increased investment, and rebased dividend · Strategic update with a detailed operational reset from new CEO to improve operational performance acrossthe Group · c.£550m fully underwritten rights issue and rebased dividend - supporting c.£1 billion1 of additional investmentto drive improved outcomes for customers and communities Keith Haslett, Chief Executive Officer, said: "It's clear from my comprehensive review that Pennon has real strengths, but there are areas where we need toimprove and deliver better outcomes for our customers and communities. I have looked hard at how we operate,maintain and invest in our assets, and today we are setting out in detail what we are doing. The operational plan, which is already underway, is practical and focuses on clearer accountability with key skillsbrought back in-house, and more investment where our assets need it most. Our Funding Plan, including today's fully underwritten rights issue raising c.£550m from shareholders to invest inthe business, means we can deliver these improvements and drive growth supported by a strong balance sheet. I am confident this plan will deliver a better service for customers, improve our environmental performance andgenerate sustainable, growing value for our shareholders." STRATEGIC UPDATE AND OPERATIONAL RESET Pennon today sets out a strategic update and a detailed plan to improve operational performance across theGroup and generate improved outcomes for its customers and the environment. Sustained improvement requiresa fundamental change in how the Group plans, delivers and maintains its assets, together with a step-up ininvestment to maximise asset health and resilience. The operational reset is focused on five pillars: people and culture, operational excellence, asset management andreliability, the environmental programme and customer transformation. Actions are already under way including theappointments of a new Chief Asset Officer and Chief People Officer, centralised asset management and theinsourcing of leakage technicians. INCREASED INVESTMENT DRIVING IMPROVED ASSET HEALTH Capital investment in the regulated water businesses over AMP8 is now expected to be approximately £3.6 billion1, around £1 billion1 more than Pennon's original plan based on the AMP8 Final Determination. Pennon continues to expect to achieve efficiencies on the AMP8 totex programme and will reinvest these whilstmaking incremental investments to improve asset health and outcomes. Ofwat's cost change process provides the mechanism to recognise certain elements of this investment through RCV2 growth. In its draft determination on the 2026 cost change process, Ofwat provisionally allowed £230 million1 (£190 million in 2022/23 prices), 76% of the amount requested by Pennon. Pennon's representations,which recognised the benefit of the additional investment supported by Ofwat and focused on the need for in-period revenues to ensure near-term cash returns, were submitted on 24 September 2026 and the finaldetermination is expected by not later than 15 December 2026. Pennon estimates that it will make around £170 million1 of further investment through the 2027 and 2028 costchange processes, subject to Ofwat approvals, and is targeting total additional RCV from cost change of £400 million3. The total investment programme is expected to deliver RCV growth of over 40% across AMP8, a step up from the34% set out at the start of the AMP, and equivalent to a compound annual growth rate of approximately 7%. FUNDING PLAN, INCLUDING A RIGHTS ISSUE OF APPROXIMATELY £550 MILLION Pennon has revised its funding plan to reflect the increased investment programme. This includes: · Continued use of ordinary course debt funding, whilst retaining gearing policy: gearing in the regulated waterbusinesses is targeted at no more than 65% of RCV throughout AMP8, within the long-term gearing policy of55-65%, with Group gearing expected to be a few percentage points higher but unlikely to exceedapproximately 70%; · Reinvestment of previously identified efficiencies; · The proposed sale of Pennon Power, with approximately £25 million of proceeds to be reinvested in 'behindthe meter' renewable generation at the Group's operational sites and the remainder applied to reduce Group
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debt; · A rebased dividend; and · A fully underwritten rights issue of approximately £550 million (the "Rights Issue"), launched today, to fund theincreased investment in the regulated water businesses. Further details of the Rights Issue are set out in a separate announcement released today. A document setting outfull details of the Rights Issue (the "International Offering Circular" or "IOC") has also been published today and,together with further information on the Rights Issue, is available on the Pennon website at www.pennon-group.co.uk/investor-information. REBASED DIVIDEND The Board recognises the importance of dividend income to shareholders and the need for dividend payments toremain sustainable through AMP8 and beyond. The total dividend for FY2026/2027 will be rebased to approximately £125 million compared with £138 million forFY2025/2026. The rebased dividend will apply to both the interim and final dividend for FY2026/2027. Taking intoaccount both the reduction in the total dividend and the effect of the Rights Issue, and adjusting for the bonusfactor, the implied underlying reduction in dividend per share is approximately 30%, with an expected dividend pershare of around 18 pence. Pennon's dividend policy will continue to be to grow dividend per share in line with CPIH from this rebased level. PRESENTATION A presentation hosted by Keith Haslett, Chief Executive Officer, and Laura Flowerdew, Chief Financial Officer, willcommence at 9:00 a.m. today, 7 October 2026, followed by a live Q&A session. To register for the presentationand Q&A session use the link at www.pennon-group.co.uk/investor-information. For further information, please contact: Pennon Group plc Institutional equity investors and analysts James Found - Investor Relations Media enquiries +44 (0)7970 066 634 Mike Turner - FGS Global Harry Worthington +44 (0)20 7251 3801 Debt investors Chris Tregenna - Group Treasurer +44 (0)13 9244 3589 Retail investors MUFG Corporate Markets +44 (0)37 1664 9234 DISCLAIMER The person responsible for making this announcement on behalf of Pennon is Emma Hough, Interim Group General Counseland Company Secretary. This announcement should be read in conjunction with the separate announcement released today in connection with theRights Issue and with the IOC published today. The information contained in this announcement is for background purposes only and does not purport to be full or complete.No reliance may or should be placed by any person for any purpose whatsoever on the information contained in thisannouncement or on its accuracy, fairness or completeness. The information in this announcement is subject to change withoutnotice. This announcement is for information purposes only and is not intended to constitute, and should not be construed as, an offerto sell or issue, or a solicitation of any offer to purchase, subscribe for or otherwise acquire, any securities of the Company inany jurisdiction where such offer or sale would be unlawful and, subject to certain exceptions, should not be distributed,forwarded to or transmitted in or into any jurisdiction where to do so might constitute a violation of local securities laws orregulations. Neither this announcement nor any part of it should form the basis of or be relied on in connection with or act as an inducementto enter into any contract or commitment whatsoever. Nothing in this announcement should be interpreted as a term orcondition of the Rights Issue. This announcement does not constitute an offer to sell, or a solicitation of offers to purchase or subscribe for, securities in theUnited States. The securities referred to in this announcement have not been and will not be registered under the US SecuritiesAct of 1933, as amended (the "Securities Act"), or with any securities regulatory authority or under the relevant securities lawsof any state or other jurisdiction of the United States, and may not be offered, sold, resold, pledged, taken up, exercised,renounced, delivered, distributed or transferred, directly or indirectly, into or within the United States except pursuant to anexemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with anyapplicable securities laws of any state or other jurisdiction of the United States. 1 Nominal prices. 2 Regulatory Capital Value is used to measure the capital base of a company when setting price limits. The RCV increases through aproportion of totex and an adjustment for inflation, net of the run-off mechanism (which is similar to depreciation of fixed assets) whichis recognised in revenue. 3 Estimated nominal value at the end of AMP8. This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authorityto act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this informationmay apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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