Member

The water companies have an investment plan of £88 billion, and I read that this is intended to be financed by only £10 billion of equity. Using the 60% rule, this is unlikely to be enough to protect the dividend-paying status of those companies through this investment plan. More equity may be required, or substantially more retained earnings. Ofwat already uses a 60% notional gearing ratio when assessing the industry, so there is acceptance that this is a reasonable number. However, the notional gearing ratio has no teeth. In its own words: