CORPORATE UPDATE: EQUITY RAISE AND GROUP DEBT REDUCTION

SW (FINANCE) I PLC

Released 01 July 2025

SW (Finance) I PLC

01 July 2025

SW (FINANCE) I PLC (the "Company")

SOUTHERN WATER SERVICES LIMITED ("Southern Water" and together with the Company, the "SW Group")

·    Southern Water secures offer of an equity support package totalling up to £1.2 billion comprising an initial £655 million of binding equity commitments with up to a further £545 million intended to be committed by December 2025

·    Refinancing of holding-company debt that will reduce holding company debt quantum by over 50 per cent and with a material maturity extension of residual holding company debt

Today, Southern Water is pleased to announce that it has secured an offer of equity support from a consortium led by funds managed by Macquarie Asset Management ("MAM") to support its AMP8 investment programme. In addition, certain holding company creditors have agreed to new terms as part of a refinancing that will reduce holding company debt levels, extend maturities and remove cash interest payments.

Commenting on the announcement, Southern Water CEO Lawrence Gosden said: "Southern Water has delivered on its Turnaround Plan, which is being recognised by its regulators, Government and other key stakeholders. The company is now well prepared for the 2025-30 regulatory period, and every penny of this equity raise will go directly towards delivering the largest growth investment programme in the sector relative to its size, for the benefit of our customers and the environment. This follows £1.65bn of equity already invested by Macquarie, since 2021. Taken together with the reduction in debt, and no forecast dividends for the 2025-30 regulatory period, the new investment will directly support Southern Water's financial resilience and improving performance."

"We are grateful for the continued support of our shareholders and creditors, who recognise the progress made in our turnaround as well as confidence in the strength of our arguments to the CMA and the Government's recent commitment to address the long-term attractiveness of the sector. We are focused on making continuous improvements to the service our customers expect and deserve, and we remain confident in our ability to maintain this positive momentum through to 2030 and beyond."

Equity Raise

MAM's offer of equity support, comprising a legally binding equity commitment of £655 million provided on the terms of an equity commitment letter of today's date, (the "Initial AMP8 Equity Commitment") and confirmation of intent to provide further equity commitments of up to a further £545 million - and with a minimum of £245 million - by December 2025.

The Initial AMP8 Equity Commitment is subject to certain conditions to facilitate the receipt of equity commitments in cash by Southern Water. These include MAM's acquisition, via a newly established vehicle, of the issued share capital of Southern Water (Greensands) Financing plc and Greensands Junior Finance Limited (which is expected to complete shortly following the date of this announcement), the Class A indebtedness of the SW Group continuing to be rated investment grade by at least two of any two of Fitch Ratings, Moody's and S&P Global Ratings, the completion of the holding company refinancings (described below) and the implementation of certain changes and waivers in respect of certain finance documents of the SW Group, including the removal of the event of default in the finance documents if the Class A indebtedness of the SW Group ceases to be rated investment grade by any two of Fitch Ratings, Moody's and S&P Global Ratings. Each of the holding company refinancings (described below) and certain changes to certain finance documents of the SW Group may be implemented by way of an English Law Scheme of Arrangement under Part 26 or, in the case of the holding company refinancings, Part 26A of the Companies Act 2006 as needed.

Holding Company Refinancings

Certain holding companies of the SW Group, working in collaboration with their respective creditors, have taken actions to improve their financial resilience and create a stable platform for raising equity commitments, the proceeds of which are to be invested through the restructured holding company group into Southern Water to support Southern Water's investment programme.

Those holding companies and their creditors have agreed to amend the terms of their debt facilities in a manner that will reduce the overall debt amount from c.£865 million to c.£415 million. The maturities of the remaining debt facilities are being extended to at least September 2030, and the borrower will have the option under certain circumstances to further extend the maturity to December 2031. Furthermore, the borrower will have the option to capitalise - rather than cash pay - interest on the remaining debt facilities. These changes will take effect concurrently with the amendments to the finance documents of the SW Group (as outlined below).

Amendments to Southern Water's Finance Documents

In order to facilitate the acceptance of the offer of the equity commitments, Southern Water has been constructively engaging with its principal financing creditors with a view to securing their support, pursuant to the terms of a lock-up agreement to be entered into between Southern Water, the Company and the consenting financing creditors, to the amendments and technical waivers with respect to its finance documents.

The discussions with Southern Water's principal financing creditors are well progressed and Southern Water will provide a further update on or prior to the publication of Southern Water's annual audited financial statements on or around 11 July 2025.

CMA

Following the Southern Water board's request to Ofwat to refer its Final Determination for independent review by the Competition and Markets Authority ("CMA"), Southern Water expects to receive the CMA's provisional determinations in September 2025 and final determinations in December 2025 or January 2026. The Initial AMP8 Equity Commitment is not conditional on the outcome of the CMA redetermination, reflecting MAM's confidence in the strength of Southern Water's 'Statement of Case' and supporting evidence.

For further information, please contact Stuart Ledger (Group CFO) at:

Address:          Southern House, Yeoman Road, Worthing, BN13 3NX, United Kingdom

Tel:                  01903 272 056

Email:              [email protected]

DISCLAIMER - INTENDED ADDRESSEES

This announcement is released by Southern Water Services Limited and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of United Kingdom assimilated domestic law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR"), encompassing information relating to the Proposals described above. For the purposes of UK MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055 as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018, this announcement is made by Richard Manning (Company Secretary) at Southern Water Services Limited.

This announcement is a communication to the market. Nothing in this announcement constitutes an offer of securities for sale in the United States or any other jurisdiction. This announcement does not constitute a prospectus or a prospectus equivalent document.

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