Yahoo Finance Waste energy powers profit boom for Pennon
The owner of waste giant Viridor reported better than expected profits despite a drop in recycling as its rubbish-fuelled power plants continue to drive growth.
Pennon, which also owns South West Water, said its eight energy-from-waste plants continued to perform well and the next four to start up would provide an “earnings kicker” for the group.
Pennon is planning to spend £1.2bn building new facilities that can burn waste that would otherwise top up Britain’s heaving landfills to create electricity.
The fresh revenue stream has proved a boost for the group, which is facing rising political risk to its water business.
Full-year pre-tax profits at South West Water rose by 4.7pc, to £180.5m in the year to March 31, but were still dwarfed by growth at Viridor, where profits jumped 17.2pc to £70.8m.
The company will pay a full-year dividend of 38.59p, up 7.3pc and in line with its policy of growing the dividend four percentage points above RPI inflation.
“A rigid control of costs has allowed it to generate some of the best regulated returns in the sector, while also earning rewards from Ofwat for exceeding targets,” said Hargreaves Landsdown.
The FTSE 250 group helped to drag the index higher as its share price climbed 5pc to around £76.70 a share.
Susan Davy, Pennon’s chief financial officer, said recycling still contributed around 10pc of the company's earnings but the market was becoming tougher because more household recycling that is collected is contaminated and cannot be used.
“There are over 40 collection methods for recycling across the country, which differ council to council. People don’t realise that if their recycling is covered in greasy leftover food for example, it can’t be recycled. There’s an element of education which is required,” she said.
