Pennon costs surge to £36m after South West Water parasite outbreak in Devon

South West Water owner Pennon has said the final bill for last year’s parasite outbreak in Devon that impacted thousands of households has contributed to a cost hit of nearly £40 million.

The supplier – which also owns Bristol Water, Bournemouth Water and SES Water – said it was facing costs of around £36 million for the supply contamination incident in Brixham and its “reshaping and transformation programmes”.

This is up from around £20 million in costs in the first half of its year, when it revealed more than £16 million was paid out for the Brixham issue after compensating affected customers, together with a further £4 million for its overhaul programme.

Despite the rising financial toll, the London-listed group said on Monday that its underlying earnings would be “broadly flat” compared with the first half and that it was on track with its own expectations for the full year to March 31.

Shares in the group fell 2% in Monday morning trading.

The outbreak in May last year left some people in hospital and hundreds of others ill after contamination of the water supply by cryptosporidium, a parasite which causes sickness and diarrhoea.

About 17,000 households and businesses in the Brixham area were issued with a “boil water” notice as scores of reported cases emerged.

The notice, instructing them not to use tap water for drinking without boiling and cooling it first, remained in place for eight weeks for some households.

In a Commons committee session last month, Pennon chief executive Susan Davy apologised to customers over pollution incidents, including the “devastating” Devon case, while also revealing her salary has risen this year.

Ms Davy has faced criticism after it was revealed that her pay package jumped 58% to £860,000 a month following the incident, after she picked up a long-term share award.

She also told the MPs in the committee session that her base salary is rising from £494,000 to £511,000 this year.

South West Water customers will see their bills increase by 23% over the coming five years, helping the company pay for improvements to its infrastructure and reduce pollution incidents.

The costs of the parasitic water outbreak saw Pennon report widened bottom line pre-tax losses of £38.8 million in the six months to September, against losses of £34 million a year earlier.

The company spent about £4 million on restructuring the business in the first half alone, having also bought Sutton and East Surrey (SES) Water for £350 million.

It is looking to cut costs across SES, which was also loss-making in the first half.