Clearwater International advises Dee Valley Group plc on €114m debt refinancing

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Clearwater International has advised water utility company Dee Valley Group plc on refinancing its existing bank funding, including a substantial increase of €29m to total €42m, with the funding being provided by HSBC. The refinancing was negotiated alongside the existing bond facility, providing €114m debt to be used to fund a capital investment programme recently agreed with the water industry regulator Ofwat over the next five years.

Dee Valley Group plc is a water-only supply company, providing mains water over a 831 square kilometre area which covers North East Wales and the North West of England. The company plans to invest up to €70m in the business between 2015 and 2020, its largest ever investment programme. This programme will cover upgrading water treatment works, rebuilding treated water storage reservoirs, cleaning mains and renewing 59km of distribution mains and 9km of trunk mains.

The UK water market is a highly regulated industry; prices charged to customers and capital costs incurred by the company are agreed with the regulator for the succeeding five year period. The refinancing comes at a time when the regulator has lowered the return on capital cap to 3.6% for the current five year investment period, from 5.1% in the previous period. The newly negotiated debt structure will allow the company to reduce its debt cost, thereby improving margins.

Clearwater International advised Dee Valley Water on the refinancing of its debt. The team was led by partner Mark Taylor with support from associate director Tom Barnwell and associate David Burton.

Andrew Bickerton, Finance Director of Dee Valley Group plc, said: “Clearwater International provided Dee Valley Group plc with valuable technical support and financial market insight for our €40m debt raising. They assisted initially with the strategic approach to take to market and, through efficient process management and funder negotiation, supported the delivery of a great outcome. In tangible terms, the new financing structure has reduced our cost of debt by around 30%. Clearwater International kept us appraised of the process at all stages and I would have no hesitation in recommending Mark Taylor and his team to other Large Corporate entities.”

Mark Taylor, Partner and Head of Debt Advisory at Clearwater International, added: “The bespoke funding structure arranged will assist Dee Valley in achieving its strategic goals over the next 5 years which is clearly critical given the nature of the underlying business. We were delighted to work alongside the Executive Team and wish them every success in the future.”

Ian Plenderleith, Chief Executive at Dee Valley Group plc, added: “This funding will enable us to deliver our largest ever investment programme which will improve and build greater resilience into our network. This is good news for our customers.”