The FTSE-100 water group United Utilities (UU) has struck a £1.8bn deal to offload a chunk of its pension liabilities amid unprecedented scrutiny on the industry’s financial resilience.
Sky News has learnt that UU, which has more than seven million customers across the northwest of England, has signed an agreement with Legal & General (L&G) to make future payments to pension scheme members.
The agreement is one of a deluge of so-called pension risk transfer (PRT) deals being struck with specialists such as L&G, Aviva and Pension Insurance Corporation (PIC).
Sources said United Utilities was expected to communicate news of the deal with L&G on Monday afternoon.
In a statement, the company said: “United Utilities has a strong balance sheet and, significantly, a fully funded pension scheme.
“As a consequence of this robust financial position, the pension scheme trustees have taken the next step in their de-risking strategy and are insuring around two thirds of the pension liabilities with Legal and General to ensure even greater long term security of the schemes.
“This enhances UU’s financial resilience with the lowest level of gearing in the sector at 58% and sufficient liquidity to cover cashflow out to at least 2026.”
The level of water companies’ indebtedness has been thrown back into sharp focus in recent weeks amid turmoil in the sector.
Thames Water, which faces the risk of being taken into temporary government ownership, said on Monday that it had agreed a £750m equity-raise with its shareholders – less than the £1bn they pledged in principle last autumn.
However, the funding is subject to a number of conditions, including investors’ approval for the company’s revised business plan.
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