Anglian Water Services' £3.5 billion whole business securitization is not expected to be impacted negatively by a U.K. regulator's recent rejection of the company's request to raise water rates, according to analysts. Ofwat, the government agency that regulates the water and sewage industries in England and Wales, may even reduce the amount by which AWS is permitted to raise rates next year; AWS is currently appealing the decision.
Regardless of the outcome of the appeal, the water company's cash flows will be sufficient to cover its payments on the securitization, says Andrew Moulder, credit analyst at Barclays Capital in London.
The deal was sold last year. Another analyst notes that while he expects AWS' business plan to see some setbacks in the wake of the rejected rate increases, the whole business deal will remain sound as higher rates are not essential to the deal's performance. The company can bolster cash flow by improving its efficiency and outsourcing, he notes. AWS also plans to raise cash on the capital markets (BW, 4/21).