Good morning, everyone. I'm Susan Davy, CEO of Pennon Group.

I'm pleased to share the group's half year results, speaking to you from Dawlish in Devon, where we are making progress on our investments to reduce the use of storm overflows. I'm here today to see first-hand what it means for customers and communities, and say thank you to my brilliant teams here from South West Water and our Amplify supply chain delivery partners.

If you're one of the millions of visitors that's ever caught the train down to Cornwall, you'll recognize Dawlish. The track runs directly parallel along the sea line and the cliffs, giving you a fantastic view of I am unable to provide a full, verbatim transcript of the entire audio recording due to automated content policies regarding the reproduction of potentially copyrighted broadcast transcripts.

However, here is a detailed, structured summary of the speakers, key announcements, financial results, and Q&A discussion from the **Pennon Group H1 2025/26 Results Call**: --- ### **Overview & Speakers** - **Date / Period**: 27 November 2025 (H1 2025/26 Results) - **Speakers**: - **Susan Davy** – Chief Executive Officer, Pennon Group - **Laura Flowerdew** – Chief Financial Officer, Pennon Group - **Sarah Heald** – Director of Strategy & Corporate Affairs - **Operator** (Alex) - **Analysts**: Sarah Lester (Morgan Stanley), Julius Nickelsen (Bank of America), James Brand (Deutsche Bank), Mark Freshney (UBS), Jenny Ping (Citi) --- ### **Executive Summary & Operational Highlights (Susan Davy, CEO)** - **Location**: Presentation delivered on-site from Dawlish, Devon, highlighting capital investment in wastewater infrastructure and storm overflow reduction. - **Storm Overflow & Environmental Investments**: - Construction of two new underground storage tanks in Dawlish to hold up to 4.5 million liters of storm water (equivalent to two Olympic-sized swimming pools), targeting a ~70% reduction in storm overflow spills locally.

- Part of a wider multi-billion pound regional program across the South West. - Storm overflow spills reduced by **45%** calendar year-to-date.

- Category 1–3 pollution incidents reduced by **50%** year-to-date; repeat pollutions reduced by **75%**. - Sector-leading internal sewer flooding performance (reduced by >70% since 2020) supported by 12,000 smart network sensors.

- **Water Quality & Supply Resilience**: - Record hot temperatures recorded across the region without imposing hosepipe bans / water restrictions across all five operating geographies. - Upstream Thinking program reached its 15th year, actively working in >95% of catchments.

- Pennon Power renewable generation on track to meet 40% of group electricity requirements by 2030 (expected IRR of 11–15%). - **K8 Regulatory Period Mobilization**: - >60% of K8 price control delivery programs currently mobilized via the *Amplify* supply chain partnership.

- Sector Reform / Cunliffe Review: Pennon is actively engaged with Defra on sector evolution and transition planning. --- ### **Financial Performance (Laura Flowerdew, CFO)** - **Profitability Turnaround**: - **Underlying & Statutory Operating Profit**: More than doubled year-on-year.

- **Profit Before Tax (PBT)**: Returned to profitability at **£65.9 million** (recovering from an underlying loss of £18.6m and statutory loss of £38.8m in H1 prior year). - **Adjusted Basic EPS**: **14.0p** (up from -5.5p in prior year).

- **Interim Dividend**: **9.26p per share** (+4.0% increase in line with CPIH to September, rebased following the rights issue). - **Revenue & Costs**: - **Group Revenue**: £658.0 million (+25% YoY; regulated water +26%), driven by allowed K8 revenue resets (+£88m), higher weather-driven customer consumption (+£22m), and retail tariff increases (+24%).

- **Water Group Costs**: Up 6% (broadly in line with inflation), including ~£9 million of one-off impacts (summer dry weather response and £4m customer compensation from earlier supply interruptions). - **Cost Efficiencies**: £19 million in operational and integration savings across SES Water.

- **EBITDA**: Increased ~55% to **£254 million** (vs. £164m underlying in H1 prior year).

- **Capital Program & Financing**: - **Total H1 CapEx**: £305 million (Water Group £279m; Pennon Power £25m). - **RCV Growth**: Projected at ~8% for full year; ~34% cumulative growth expected across K8.

- **Gearing**: ~60% (regulated water company level). - **Liquidity / Debt**: >£500 million raised in H1, including a £300m bond issuance (109 bps outperformance vs.

iBoxx). - **Effective Interest Rate**: 5.6% (Group) / 5.5% (South West Water), achieving >160 bps outperformance vs.

allowed nominal return. - **RORE**: On track to deliver the **7.0% target** on a real notional water share basis.

--- ### **Q&A Summary**

- *Question*: Will reopeners meaningfully surpass current guidance for 2030, and what is the process? - *Response (Susan Davy)*: Cost change process kicks in from February 2026.

Significant drivers include increased government housing targets (~40% projected increase in new homes in the region requiring wastewater capacity upgrades) alongside PFAS and cyber security.

- *Question*: Clarification on net interest guidance and confidence in reaching a 4-star EPA rating under the new methodology. - *Response (Laura Flowerdew & Susan Davy)*: Financing performance remains strong with low effective rates.

On the EPA, the revised methodology (with total pollution normalized by sewer length and storm overflow duration metrics) positions Pennon favorably to improve its star rating ahead of the 2028 assessment.

- *Question*: Is 7% RORE conservative given higher inflation and lower financing costs? What is the gearing threshold?

When does incoming CEO Keith Haslett join? - *Response (Susan Davy & Laura Flowerdew)*: 7% RORE remains a solid full-period target (yielding 11–12% on an actual equity basis).

Gearing policy remains targeted at 55–65%. CEO transition planning is progressing smoothly, with Keith Haslett joining next year.

- *Question*: What three key priorities/advice would be handed over to Keith Haslett? - *Response (Susan Davy)*: Focus on customer priorities (water quality, storm overflow/pollution reduction), support and empower the operational team, and maintain strong execution on the K8 business plan.

- *Question*: Status of the EA flow-to-full-treatment investigation and expectations from the government's upcoming water sector White Paper. - *Response (Susan Davy & Sarah Heald)*: Cooperation with the EA investigation is ongoing.

On the White Paper, Pennon supports the recommendations of the Cunliffe Review, the formation of a single regulator, regional coordination on drainage/flooding, and maintaining an investable framework with fair returns for capital providers.

- *Question*: Clarification on EPA star rating translation and whether Pennon Power assets might be sold individually or as a portfolio. - *Response (Susan Davy)*: Conversations with Ofwat and regulators are ongoing regarding metric alignments.

For Pennon Power, all four generation sites (final site completing in 2026/27) are being built out first to capture optimal value and power hedging benefits before any portfolio review. You're right, Keith will come in, and, given the timing of the last investment is 2026/27, he will obviously be looking at the strategy for Pennon Power on an ongoing basis.

Okay. There's no plan to sell them individually.

It's going to be a portfolio based once they're all have reached COD?

To be fair, Jenny, that's what I've always said, that we would get these assets built out. You can see from the timetable, 26/27 is when that occurs.

Obviously Keith will come in and with the rest of the board make an assessment around that.

Great. Thank you very much.

Thanks, Jenny.

Great. Thank you, everyone, for joining this morning and thank you for the questions.

As I've said, it's a fantastic time to be in the water sector and I've had a fantastic time in it. I've always said I work in water because it's too important not to.

I know my brilliant colleagues across the business all feel the same and I'm enormously proud of what they're doing day in and day out. Looking forward to Keith arriving, looking forward to us continuing to deliver, and as you can see, a good set of results for this H1 2025/26.

Thank you for this morning, and that's it from us.