In the update, ahead of its full year results for the year ended 31 March 2016, Pennon Group states it is on track to drive sustainable profit and dividend growth across its subsidiaries which include South West Water and Viridor.
Higher group expectations for earnings before interest, taxes depreciation and amortisation (EBITDA) are reportedly helped by the full year effect of the five new energy recovery facilities brought on stream by Viridor in 2014/15.
With takeover of the Peterborough EfW now complete – which was delivered on time and below budget – the total number of operational recovery plants in Viridor’s portfolio has risen to eight (see letsrecycle.com story).
Construction of its Glasgow, Dunbar and Beddington facilities is meanwhile progressing well.
Combined, Viridor’s EfW portfolio is on track to deliver a targeted £100 million in EBITDA for Pennon Group in 2016/17, despite pressure on power prices and the removal of Levy Exemption Certificates.
The exemption for renewably sourced electricity was formally scrapped by Chancellor George Osborne in August 2015 – which the industry warned could reduce revenue by around £5 per MWh (see letsrecycle.com story).
Landfill
Landfill volumes are also continuing to decline in the second half of the year, with Viridor closing one in 2015/16 as part of a wider strategy to reduce the number of operating landfills to three strategic sites by 2020.
Landfill power generation is on track, with performance expected to be in line with the first half of the year.
Viridor is also targeting greater margins for recyclables through improvements to source material quality and better outputs. However, it remains ‘cautious’ about future recyclate price growth.
Commenting on the forecast, Chris Loughlin, the newly appointed chief executive of Pennon Group, said there was further opportunity to deliver improved efficiency and effectiveness driven by management changes.
He said: “Viridor, South West Water and Bournemouth Water are all performing well and results for the full year 2015/16 are on course to meet management expectations.”
He added: “As we move towards a more consistent risk profile across Pennon, we are increasingly well-positioned to drive sustainable profit and dividend growth. We remain committed to growing dividends at +4% above RPI inflation through to 2020.”
Pennon Group intends to announce its full year results for 2015/16 on 25 May.
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