The chief executive officer of the Pennon Group, Chris Loughlin, has outlined further details of how the company is to use the proceeds of the £4.2 billion sale of Viridor.
In an investor meeting after the sale was announced last week (18 March), Mr Loughlin said the company will use the funds — which could rise by a further £200 million at a later date — to reduce Pennon’s company borrowings, return dividends to shareholders and retain funds for future opportunities.
Following the proposed sale of the waste management company to American private equity company KKR, Pennon is to become a purely UK-focused water services group, Mr Loughlin said.
Speaking at the briefing, Mr Loughlin said: “Viridor is successful in delivering on its vision. It’s transforming waste into energy; it’s got high-quality recycling opportunities in the plastic area.
“I think today’s announcement is a positive step forward for Viridor. It will continue to invest significantly in the future.”
The Pennon Group announced last week that it had entered into an agreement for the sale of Viridor Planets UK Bidco Limited, an investment business established by KKR, for £4.2 billion, subject to conditional approvals from shareholders and the European Commission (see letsrecycle.com story).
Having managed the waste management company for nearly 30 years, the sale of Viridor was first mooted by the Pennon Group following a strategic review based on a strong financial period in September 2019.
It was widely reported in January 2020 a bid for Viridor by KKR had been rejected (see letsrecycle.com story).
Mr Loughlin said it had been unanimously agreed by shareholders that the deal was in the company’s best interests.
Now the sale has been agreed, Mr Loughlin said there was to be a transitional period for the Pennon Group throughout 2020. When the company releases its full results in June, a new dividend policy is to be introduced, he said.
A break fee of £42 million has been included in the transaction, were KKR to change their mind and pull out of the deal.
Mr Loughlin also took the opportunity presented by the investor briefing to address the growing coronavirus crisis.
He said: “Coronavirus is front and foremost in our minds at the moment. As a company we do an awful lot of preparation to try and anticipate what might impact on us, and clearly in our minds first and foremost is the safety of our own employees and of all our customers.
“Equally important is making sure we continue to maintain the service to the communities we serve because water and sanitation are absolutely vital fundamental building blocks to society going forward.
“Everyone is putting their efforts – and quite rightly so – into strengthening the health services, but food and water come very close behind that to make sure the public can maintain most things.”