Analysts Upgrade United Utilities

THE VALUE INVESTOR: Analysts have upgraded their fair value estimate for the share price of United Utilities, but the water company remains overvalued

Andrew Bischof 4 December, 2014 | 3:57PM

Much of Britain's water infrastructure is around 200 years old and could require major upgrades during the next decade. We project that United Utilities (UU.) which is one of 11 U.K. water utilities, will invest roughly £1.6 billion during the next two years in its water and wastewater system to address these needs.

Unlike in the United States, where regulators frequently approve utility rates only after the capital is invested, regulators in Britain approve capital budgets and utility rates once every five years based on utility budget forecasts. Utilities then must stay within that budget to achieve sufficient rates of return. United Utilities is currently under review for its upcoming 2015-2020 rates with a decision expected in December 2014. The current revised plan calls for average household bills falling by 4.1%.

United Utilities' regulated water-distribution monopoly leads us to assign the firm a narrow economic moat. But we caution investors to beware of execution risk in Britain's five-year price reviews, as the company must meet performance targets, along with the threat of continued conservation.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
United Utilities Group PLC859.80 GBX-0.60

About Author

Andrew Bischof  

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies