South East Water warns over survival as funds dry up

South East Water has warned that there is “material uncertainty” over its survival, after a disastrous year in which the lossmaking company paid millions of pounds in fines and its chief executive was forced out.The water supplier to 2.4 million customers said it had sufficient funds to make it through to July 2027. However, “shortly after” it will need “new loan facilities in order to continue as a going concern,” the company said in its annual report published on Friday.South East Water, which serves customers across Kent, Sussex, Surrey, Hampshire and Berkshire, added that “discussions with lenders to provide funds are at an advanced stage and are expected to conclude over summer 2026” but were not legally committed.The company has gone through one of the worst years since privatisation in 1989, with a series of outages that infuriated customers and politicians. Its chair, Chris Train, and chief executive, David Hinton, were both forced to resign after months of criticism over company’s response to major supply failures in Kent and Sussex between November and January.Ofwat, the regulator for water companies in England and Wales, this week said South East will pay a £30.5m redress package related to those and other outages – putting further pressure on its finances.Its struggles underline the challenge the water industry poses for Andy Burnham, with the incoming prime minister considering putting Thames Water into special administration, a form of temporary nationalisation.South East’s directors said that because new funds from shareholders are not yet legally committed “we concluded that (sic) the risk that the funding will not be received constituted a material uncertainty”.Its annual report revealed that losses had widened to £33m, up from £14m last year. That came despite revenues soaring from £285m to £352m after Ofwat allowed it to increase bills by 7%.Despite that performance, the annual report showed that Hinton’s pay increased compared with the previous year. He received £488,000 in total pay, even after forgoing his bonus under pressure from MPs – up from £458,000 the previous year.Hinton’s resignation meant he will not be paid a heavily criticised £400,000 “service award” if he had made it to July 2030.South East Water is owned by the NatWest Group Pension Fund, the Utilities Trust of Australia, and the Desjardins cooperative financial group based in Quebec, Canada. They put £200m of new money into the company in May 2025, following an injection of £75m in December 2024.The company’s risk and audit committee judged that it would be able to retain its investment-grade rating – only for it to lose it days later when Moody’s Investor Service downgraded it to junk status, suggesting there was a higher likelihood of the company defaulting on its debt payments.