China's First Interbank Water REIT, Capital Water Project, Launches Expansion Offering

Pennon Group said on Wednesday it would raise about £550 million through a fully underwritten rights issue and cut its dividend as its new CEO launched an overhaul of the water utility's operations and stepped up investment. The total dividend for the 2026/2027 financial year will be cut to approximately £125 million from £138 million for 2025/2026, with the lower payout applying to both the interim and final dividends, and after accounting for the cut, the rights issue and a bonus factor, Pennon put the implied underlying reduction in dividend per share at approximately 30%, leaving an expected dividend of around 18 pence per share. The rights issue, launched on Wednesday, will fund more investment in the regulated water businesses and supports about £1 billion of additional investment, with full terms in a separate announcement and an international offering circular published the same day. Capital investment in the regulated water businesses over AMP8 is now expected to be approximately £3.6 billion, around £1 billion more than Pennon's original plan based on the AMP8 Final Determination, and the total investment programme is expected to deliver RCV growth of over 40% across AMP8, up from the 34% set at the start of the period. In a draft decision on Ofwat's 2026 cost change process, the regulator provisionally allowed £230 million, or £190 million in 2022/23 prices, which is 76% of the amount Pennon requested, and Pennon estimates it will make around £170 million of further investment through the 2027 and 2028 cost change processes, subject to Ofwat approval, targeting total additional RCV from cost change of £400 million.

Krungsri Securities said in an analysis that TTW Public Company Limited, or TTW, is expected to post net profit of 863 million baht in the third quarter of 2026, down 12% year on year but up 31% quarter on quarter. The water supply business is still growing slightly on higher water sales volumes from TTW and BIE, driven by industrial customers' water demand, but it is being pressured by the profit contribution from CKP, which is expected to be weak year on year because electricity output from the NN2 dam fell about 50% year on year, in line with the dam's inflow, while the gross margin of the SPP power plant declined on higher gas costs. If profit meets expectations, net profit for the first nine months of 2026 would represent 72% of the full-year 2026 figure, slightly below the 75% seen in the first nine months of 2025. For the fourth quarter of 2026, net profit is expected to fall both year on year and quarter on quarter due to a lower gross margin from higher depreciation costs and lower water selling prices, as well as the prospect of a weaker profit contribution from CKP amid El Niño conditions in the second half of 2026. The research team maintains a Neutral recommendation on its unchanged 2027 target price of 10.0 baht, based on the SOTP method. Because TTW's profit trend over 2026 to 2028 is expected to stay roughly flat and unremarkable, the team keeps its Hold recommendation to collect dividends on stable DPS from the water supply business, representing a dividend yield of about 6% per year over 2026 to 2028.