Pennon – Circular and notice of general meeting

Pennon Group plc

3 June 2021

Pennon Group plc

Proposed Special Dividend and Share Consolidation and changes to Articles of Association

Pennon Group plc (Pennon or the Group) announced earlier today, 3 June 2021 that Pennon has acquired 100% of the issued share capital of Bristol Water Holdings UK Limited (the Acquisition) and has proposed a Special Dividend and Share Consolidation (the Acquisition, Special Dividend and Share Consolidation Announcement).

Pennon has today published a shareholder circular in connection with the Special Dividend, Share Consolidation, increase of the Company's existing authority to repurchase shares in order to execute a Share Buy-back, amendment of certain of the Company's existing AGM authorities in relation to allotment of shares and disapplication of pre-emption rights in order to reflect the Share Consolidation and making certain amendments to the current articles of association of the Company (the Circular)^[1].

2020/21 has been a transformative year for the Group. On 8 July 2020, we completed the sale of Viridor to KKR for net proceeds of £3.7 billion. The sale recognised the strategic value developed by Pennon over many years, realising significant value for shareholders, and creating the opportunity to refocus the Group exclusively on UK water.

The Group is now firmly focused on leading, transforming and optimising water and waste water businesses, building on its consolidation experience in the sector, and through South West Water is the only water company to have been fast-tracked twice in successive price reviews.

In addition to driving improved operational excellence, we will also be transforming ourselves as we scale up investment in the environment, kick-starting our race to net-zero carbon by 2030, focusing on sustainable living, championing renewables and reversing carbon emissions, and delivering sustainable solutions for customers, communities and the regions we operate in.

Following the Disposal, and ensuring that the balance sheets of both the Group and South West Water are in a sustainable position for the future, the Group has taken steps to right-size our debt portfolio at the Pennon company level, repaying c. £1.1 billion, with £0.1 billion cash retained in Pennon and gross debt at the Pennon company level of £0.2 billion.

In addition, the Group plans to invest a further £0.1 billion into South West Water in support of the Green Recovery, which will aim to deliver solutions to address climate change, improve public health and create jobs, over and above existing commitments. The Group also plans to increase our contribution to Pennon's principal pension scheme, over and above normal contributions, to £53 million (which includes an amount of £36 million already contributed in H1 2020/21).

1.   Special Dividend and Share Consolidation and changes to Articles of Association

As detailed in the Acquisition, Special Dividend and Share Consolidation Announcement, Pennon is proposing a special dividend of c.£1.5 billion in aggregate, representing £3.55 per Existing Ordinary Share (the Special Dividend). The Board is proposing to pay the Special Dividend to shareholders on the register of members of the Company as at 6.00 p.m. on 2 July 2021.

Further details on the Special Dividend and Share Consolidation are contained in the Acquisition, Special Dividend and Share Consolidation Announcement and the Circular.

2.   Circular Publication and General Meeting

The Circular (including the Notice of General Meeting) will be sent or made available to shareholders shortly.

The Circular contains further information on the Special Dividend, Share Consolidation, increase of the Company's existing authority to repurchase shares in order to execute a Share Buy-back, amendment of certain of the Company's existing AGM authorities in relation to allotment of shares and disapplication of pre-emption rights in order to reflect the Share Consolidation and making certain amendments to the current articles of association of the Company, and a notice convening a general meeting of the Company which is to be held at Peninsula House, Rydon Lane, Exeter, United Kingdom, EX2 7HR at 9.00 a.m. on 28 June 2021 at which ordinary and special resolutions will be proposed for shareholders to approve such matters (the General Meeting).

The health and wellbeing of our shareholders, Watershare+ Participants, colleagues and the wider community is of the utmost importance to Pennon. Given recent developments with the spread of new COVID-19 variants in the UK, there will be a mandatory requirement to take a COVID-19 rapid lateral flow test at the General Meeting venue. Attendees are advised to arrive at the venue a minimum of one hour before the General Meeting in order to complete the testing and registration formalities. Attendees will be required to make certain confirmations as a condition of entry to the General Meeting, including that they (or members of their household, support bubble or childcare bubble) have not recently displayed symptoms of COVID-19 and/or have not been told to self-isolate by NHS Test and Trace, the NHS COVID-19 App or otherwise. Any person who does not agree to take a COVID-19 rapid lateral flow test at the venue, whose test result at the venue is positive or who fails to provide the necessary confirmations, may be refused entry to the General Meeting.

Social distancing will be in place at the General Meeting, and attendees will be asked to wear a mask for the duration of the General Meeting (unless exempt). Attendees will be required to check-in at the venue using the NHS COVID-19 App or provide their contact details to a member of staff for contact tracing purposes. There may be delays as attendees proceed through the testing formalities and security checks to be carried out prior to entry to the venue.

Please note that shareholders not attending the General Meeting in person are encouraged to submit their vote in advance by appointing the Chair of the General Meeting as proxy, with voting instructions. The deadline for proxy appointments is 9.00 a.m. on 24 June 2021 for shareholders.

In addition, the Board confirms that: (i) guests of shareholders will not be permitted entry to the General Meeting; (ii) there will be no circulation of shareholders or members of the Board before or after the General Meeting; and (iii) refreshments will not be served at the General Meeting.

Please note that shareholders not attending the General Meeting in person are encouraged to submit their vote in advance by appointing the Chair of the General Meeting as proxy, with voting instructions. The deadline for proxy appointments is 9.00 a.m. on 24 June 2021 for shareholders.

Full details of arrangements for the General Meeting are set out in the Circular.

The Circular and the Notice of General Meeting have been submitted to the Financial Conduct Authority's National Storage Mechanism (the NSM) and will be available for inspection on the NSM's website at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. These documents will also be available on the Pennon website at https://www.pennon-group.co.uk/investor-information from the date of this announcement up to the date of the General Meeting and for the duration of the General Meeting.

3.   Expected Timetable

Notes:

(1)   All references in this Announcement to time are to London (UK) time unless otherwise stated.

(2)   Certain times and dates are conditional upon approval of the Resolutions and Admission.

(3)   Payment dates refer to date of payment by BACS and CREST credit and date of despatch of cheques, and payments may be subject to processing lead-times or delays.

The timetable may be subject to change. If any of the above times and/or dates change, Pennon will give adequate notice by issuing an announcement through an RIS.

4.   Pre-Close Trading Statement

On 30 March 2021, Pennon issued a Pre-Close Trading Statement. The Company's expectations remain in-line with this Trading Statement.

This announcement contains inside information. The individual responsible for releasing this announcement is Simon Pugsley, Group General Counsel and Company Secretary.

For further information, please contact:

Pennon Group plc

Media Enquiries

Barclays Bank PLC, acting through its Investment Bank

Financial Advisor and Joint Corporate Broker to Pennon

Morgan Stanley & Co. International plc

Financial Advisor and Joint Corporate Broker to Pennon

About Pennon

Pennon is a UK-focused water infrastructure group, comprising South West Water (incorporating Bournemouth Water) and Pennon Water Services. 

South West Water is focused on providing services in the most efficient and sustainable way possible. Innovation, new technologies and a holistic approach underpins our commitment to delivering service improvement and long-term value.

South West Water (incorporating Bournemouth Water) provides water and waste water services to a population of c.1.8 million in Cornwall, Devon and parts of Dorset and Somerset and water only services to c.0.5 million in parts of Dorset, Hampshire and Wiltshire.  

Entering the new regulatory period (2020-25), South West Water is the only water and waste water company to have achieved fast-track status for two consecutive price reviews. South West Water is focused on delivering for our customers and communities and continues to be committed to the highest standards of environmental performance. Work is already underway to deliver the commitments in the New Deal Business Plan 2020-2025 focusing on cost base efficiency, operational performance, customer service and sustainable growth.

Pennon Water Services (an 80:20 venture with South Staffordshire Plc) provides retail water, waste water and value-added services to over 160,000 non-household customer accounts across England and Scotland, and is focused on achieving long-term, sustainable growth.  

Further information on Pennon can also be found on the Group's website, www.pennon-group.co.uk

Pennon LEI: 213800V1CCTS41GWH423

Important information relating to the financial advisors and joint corporate brokers

Barclays Bank PLC, acting through its Investment Bank (Barclays), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Pennon as corporate broker and for no one else in connection with the Acquisition, Special Dividend and Share Consolidation and will not be responsible to anyone other than Pennon for providing the protection offered to clients of Barclays or for providing advice in relation to the Acquisition, Special Dividend and Share Consolidation, the contents of this Announcement or any transaction, arrangement or other matter referred to in this Announcement.

Morgan Stanley & Co. International plc (Morgan Stanley), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Pennon as corporate broker and for no one else in connection with the Acquisition, Special Dividend and Share Consolidation and will not be responsible to anyone other than Pennon for providing the protection offered to clients of Morgan Stanley or for providing advice in relation to the Acquisition, Special Dividend and Share Consolidation, the contents of this Announcement or any transaction, arrangement or other matter referred to in this Announcement.