Pennon is raising £550 million and cutting its per-share dividend by about 30% to support a larger investment plan. Citi and Deutsche Bank still rate the shares a buy, but the recovery depends on better operations and disciplined spending.
Pennon's fully underwritten rights issue opened on 7 October. It offers seven new shares for every 15 held, at 250 pence each, with results due on 27 October. The group is also cutting its dividend as it seeks to reset operations.
Pennon expects total dividend payments of about £125 million in 2026/27, down from £138 million in 2025/26. The cut applies to both the interim and final dividends, according to the company's dividend announcement. Shareholders face a smaller payout as the company plans to ramp up investment.
The 250-pence rights issue price represents a discount of about 35.5% to Pennon's theoretical ex-rights price.
Pennon plans to add £1 billion of spending during AMP8, taking its planned investment to £3.6 billion. It has set a gearing ceiling of 65% of its regulated asset base. Gearing measures debt against the value of regulated operations. The limit is a stated constraint, not evidence that the spending will deliver the operational improvement management wants.
Citi sees a limit to the growth case. Even with higher investment, the bank estimates Pennon's annual regulated asset base growth at about 7% to 8%, below the 9% to 10% it cites for peers. A proposed sale of Pennon Power could help fund the plan: about £25 million in proceeds is intended for behind-the-meter renewables, with the rest set to reduce group debt. The sale has not been completed, so that money is not yet available.
After accounting for the new shares and the bonus adjustment, Pennon expects a dividend of about 18 pence per share, a roughly 30% year-on-year cut, according to its rights issue announcement. The offer is expected to issue 220,257,997 new shares.
On 8 October 2026, Pennon shares partially recovered after falling more than 20% following the rights issue and dividend cut, as investors weighed a major restructuring of the group's financing.
