North America Roadshow – Dec 2020 Disclaimer

Half Year Results 2020/21

For the purposes of the following disclaimers, references to looking statements include, among other things, changes in This document is not an offer to sell, exchange or transfer this “document” shall mean this presentation pack and shall Government policy; regulatory and legal reform; compliance any securities of Pennon Group or any of its subsidiaries be deemed to include references to the related speeches with laws and regulations; maintaining sufficient finance and and is not soliciting an offer to purchase, exchange or made by or to be made by the presenters, any questions funding to meet ongoing commitments; non-compliance or transfer such securities in any jurisdiction. and answers in relation thereto and any other related verbal occurrence of avoidable health and safety incidents; tax Without prejudice to the above, whilst Pennon Group or written communications. compliance and contribution; failure to pay all pension accepts liability to the extent required by the Listing Rules, obligations as they fall due and increased costs to the This document contains certain “forward-looking the Disclosure Rules and the Transparency Rules of the UK Group should the defined benefit pension scheme deficit statements” with respect to Pennon Group’s financial Listing Authority for any information contained within this increase; non-recovery of customer debt; poor operating condition, results of operations and business and certain of document which the Company makes publicly available as performance due to extreme weather or climate change; Pennon Group's plans and objectives with respect to these required by such Rules: macro-economic risks impacting commodity and power matters which may constitute “forward-looking statements” prices and other matters; poor customer service and/or a) neither Pennon Group nor any other member of Pennon within the meaning of the U.S. Private Securities Litigation increased competition leading to loss of customer base; Group or persons acting on their behalf shall otherwise Reform Act of 1995 (the “PSLRA”). business interruption or significant operational have any liability whatsoever for loss howsoever arising, Forward-looking statements are sometimes, but not always, failure/incidents; difficulty in recruitment, retention and directly or indirectly, from use of the information contained identified by their use of a date in the future or such words development of skills; non-delivery of regulatory outcomes within this document; as “anticipate”, “aim”, “believe”, “continue”, “could”, “due”, and performance commitments; failure or increased cost of b) neither Pennon Group nor any other member of Pennon "estimate“, “expect”, “forecast”, “goal”, “intend”, “probably”, capital projects/exposure to contract failures; failure of Group or persons acting on their behalf makes any "may", “plan", “project”, “seek”, “should”, “target”, “will” and information technology systems, management and representation or warranty, express or implied, as to the related and similar expressions, as well as statements in the protection, including cyber risks; and all risks described in accuracy or completeness of the information contained future tense. the Pennon Group Annual Report published in July 2020. within this document; and Forward looking statements should therefore be construed By their very nature forward-looking statements are in light of such risks, uncertainties and other factors and c) no reliance may be placed upon the information inherently unpredictable, speculative and involve risk and undue reliance should not be placed on them. Nothing in contained within this document to the extent that such uncertainty because they relate to events and depend on this document should be construed as a profit forecast. information is subsequently updated by or on behalf of circumstances that will or will not occur in the future. Pennon Group. Various known and unknown risks, uncertainties and other All written or verbal forward-looking statements, made in factors could lead to substantial differences between the this document or made subsequently, which are attributable Past performance of securities of Pennon Group cannot be actual future results, financial situation, development or to Pennon Group or any other member of the Pennon relied upon as a guide to the future performance of any performance of the Group and the estimates and historical Group or persons acting on their behalf are expressly securities of Pennon Group. results given herein. Important risks, uncertainties and other qualified in their entirety by the factors referred to above. factors that could cause actual results, performance or Pennon Group may or may not update these forward- achievements of Pennon Group to differ materially from any looking statements. outcomes or results expressed or implied by such forward

Pennon has been driven by its strategic vision to become a leader in UK infrastructure, delivering for the benefit of customers, communities and the environment 2020 has been a landmark year for Pennon, culminating in the completion of the sale of Viridor on 8 July for an enterprise value of £4.2 billion Pennon continues to pursue operational excellence and growth within the UK water industry

Water & Wastewater Water Retail

Regulatory ring-fence

Water and wastewater services to B2B water retailer a population of c.2.2 million • PWS is our growing B2B water retailer • Serves Cornwall, Devon, parts of Dorset, currently serving >160,000 customers Somerset, Hampshire and Wiltshire nationwide • Awarded ‘fast-track’ status by Ofwat for • c.13,000 new accounts won since market 2020-25 Business Plan – only company to opening achieve successive fast-track status • Well positioned for the future • Potential to double base returns(1) in K7 (2020-25)

Market Regulation – overview • As a provider of water and wastewater services, South West Water operates within a framework which contains a variety of regulators • Regulation on price and performance by economic, quality and environmental factors - this regulatory framework is designed to safeguard the best interests of customers and the environment • Defra set the overall water and sewerage policy framework in England, other regulators focus on specific economic, environmental, customer and drinking water quality aspects

Ofwat – water sector economic regulator – legal obligations • Ensure companies properly carry out their functions • Ensure companies can finance their functions • Protect the interest of consumers, wherever appropriate, by promoting effective competition • Ensure the long-term resilience of water and sewerage systems • Promote economy and efficiency • Contribute to the achievement of sustainable development

Minimal changes to South West Water’s 2020-25 Business Plan

Totex allowance of c.£2 billion – in line with South West Water’s fast-track Draft Determination

An innovative sharing mechanism – WaterShare+

A K7 capital investment programme of c.£1 billion

Appointee cost of capital for the industry of 2.96% (CPIH), 1.96% (RPI)

As a fast-track company, South West Water received a 10 basis point uplift to our base Return on Regulated Equity

© Pennon Group plc 2020 7 Pennon New Vision and Purpose Bringing water to life – supporting the lives of people and the places they love for generations to come Reshaping the Group – focused on UK water

• Disciplined approach to assessing potential opportunities Trusted A new deal for our customers, the environment and our employees Collaborative Living our core values, operating in the public interest Sustainable future • Net Zero by 2030 Responsible • Eliminating water poverty by 2025 • Social mobility pledge signatory • Green recovery – Building Back Better Progressive

WaterShare RORE(1) 8.0% – Doubling base returns

Outcome Delivery Incentives Totex Financing £34million 80% outperformance 2.5% on track/ahead efficiency momentum effective interest rate – of target continuing locked in efficiency

Creating value for shareholders and customers Sale of Viridor WaterShare+ Dividend policy

Pioneering scheme sharing £1.7billion £20million Sector leading – profit on sale with customersahead of planCPIH +2%

© Pennon Group plc 2020 (1) WaterShare RORE financing outperformance is based on the outturn effective interest rate, translated into an effective real interest rate using cumulative K7 forecast blended inflation 9 Paul Boote Group Finance Director

Group statutory £4.2 billion Viridor sale completed 8 July – Profit After Tax £1.7 billion profit on disposal £1,770.4m

Resilient financial results following K7 reset Continuing Group PBT (underlying) • COVID-19 financial impact broadly in line with initial expectations £86.7m

90 basis point reduction in South West South West Water Effective Water’s effective interest rate Interest Rate 2.5%

Sustainable earnings supporting sector Continuing Group EPS 17.9p leading dividend policy of CPIH +2% (adjusted)

Dividend per share 6.77p

South West Water Group Pennon Water Services Impact of COVID-19 K7 on Household and Contract wins revenue Non-household in Pennon Water reset demand of (£10.7m) Services

Revenue (£m)

COVID-19 impacts (£10.7m)

Resilient COVID-19 K7 Interest rate charge operations – revenue reduction following limited financial reset hedging reset impact

Profit before tax (£m)

Robust cash flows from Continuing Substantial Group supporting cash resources investment from Viridor sale

Net debt (£m)

Net cash (£m)

(1) Includes disposal of £39.0m of cash balances and £240.7m of lease financing held by Viridor at 8 July 2020 © Pennon Group plc 2020 (2) Includes cash flows relating to retirement of Pennon company debt and cash flows from discontinued operations 14 Pennon Sustainable balance sheet – South West Water

Agile and efficient financing and liquidity Floating £467m • South West Water’s £2.2 billion of net debt is a mix of fixed, floating and index-linked 21% borrowings – average maturity c.20 years • Supported by our pioneering Sustainable 53% Financing Framework – £30 million raised 26% in the period Fixed/ swapped debt Index- £1,166m linked £578m

• Sustainable leverage – expected to reduce Water Business over K7 Debt / RCV(1) 65.2% 64.2% at 30 September 2019

• 90 basis point reduction in effective H1 2020/21 interest rate SWW effective interest rate • Effective hedging through K7 to manage interest rate risk 2.5%

(1) Based on Regulatory Capital Value (RCV) forecast at 31 March 2021 and South West Water Group net debt. Regulatory South West Water Limited gearing is 67.4% © Pennon Group plc 2020 at 30 September 2020 (66.9% at 30 September 2019). Net debt includes all leases as required under IFRS16: Leases 15 Pennon Disciplined use of proceeds

Value accretive £3.7bn net right-sizing of Substantial cash proceeds Pennon company funds available received debt – c.£0.75bn – £2.7bn repaid to date

Enterprise value A £4.2bn £0.5 billion debt and debt-like A items transferred with Viridor B £0.9 billion Pennon company B debt to be repaid C C £0.1 billion(1) associated £2.7bn expenditure and pension funds D available contributions D £0.3 billion Pennon company debt assumption

© Pennon Group plc 2020 (1) Reflects £63m transaction costs, £36m pension contribution and £57m charges associated with retirement of Pennon company debt, net of any cash balances on disposal 16 Pennon Resilient financial results

£86.7 2.5% 17.9p million South West Water Continuing Group Continuing Group effective interest rate EPS (adjusted) PBT

CPIH £1,770.4 £2.7 +2% million billion sector leading statutory PAT of available funds dividend policy

© Pennon Group plc 2020 20 South Talented people doing great things West for customers and each other Water Protecting employees Nurturing talent • c.1,800 employees • 500 new apprenticeships over the completed mental next 5 years health training • Early adopter of Kickstart – • Expanding our mental 50 placements for young people health first aider programme • New graduate programme launching • 24/7 confidential assistance in 2021 programme available to all employees

A diverse and inclusive place to thrive

• Top quartile for Hampton Alexander review • Gender pay gap – significantly below national average

© Pennon Group plc 2020 21 South Delivering outstanding services for customers West and communities Water Reducing customer complaints Priority Services 5% reduction in 21,000 registered on our written complaints temporary COVID-19 register H1 20/21 58% reduction from start of K6 H1 15/16

Increasing social tariff uptake Digital improvements for customers 17% increase 42% of customers in customers use our digital benefiting from platform our social tariff Continuing H1 20/21 improvements in 76% increase website functionality, since K6 online chat and H1 15/16 navigation

(1)

© Pennon Group plc 2020 (1) 2015/16 based on assumed H1 position 22 South Driving operational excellence for customers West Water Reducing customer interruption time Delivering sustainable leakage solutions

51% reduction Target met in supply every year interruptions(2) H1 20/21 H1 20/21 improvements 65% reduction • 40% increase in since start of leak detection K6 H1 15/16 • 25% reduction in leakage running (1) time

Improving water quality for customers Reducing number of flooding incidents 18% reduction Consistent in taste, odour & performance colour contacts – ahead of target H1 20/21 H1 20/21 38% reduction Internal flooding since start of down 35% since K6 H1 15/16 K6 H1 15/16

(1) Based on assumed H1 proportion of 2015/16 performance © Pennon Group plc 2020 (2) Industry comparative measure: calculated as the average number of minutes lost per customer for the whole customer base for interruptions that lasted three hours or more 23 South Driving operational excellence – West protecting the environment Water Continuing bathing water improvements Sector leading catchment management Delivery on investment Increasing biodiversity – 2 years ahead of plan • Driving environmental improvements • Maintaining excellent quality supporting since 2005 our region’s economy • Catchment management in 80% of our supply areas • Over 14,000 hectares improved at H1 2020/21 • Ahead on biosecurity commitment for invasive species • c.50,000 trees planted towards our 100,000 commitment for 2025 (1)

(2)

(1) 2020 forecast based on internal assessment of available data, but formal clarification may not be issued in light of COVID-19 © Pennon Group plc 2020 (2) Green hairstreak (Callophrys rubi) butterfly 24 South Driving operational excellence – West 80% of ODIs on track Water Outcome Delivery Incentives (ODIs)(1)

Bespoke ODIs Common ODIs Comparative ODIs Internal sewer Bathing water quality Customers on social tariff Leakage flooding Biodiversity Water Quality Supply interruptions

£3.5m £0.1m (£4.9m)

• Pollutions

Targeted Pollution Incident Reduction Plan Pollution Incident Reduction Plan

southwestwater.co.uk

© Pennon Group plc 2020 (1) Includes financial and reputational measures. H1 position based on 50% of full year assumptions 25 South Delivering efficiently and effectively West Water £34m totex outperformance in H1 2020/21 Maintaining momentum over K7

Support & admin services Operational ways of working

Outcome driven smart design Right sourcing

Innovation supporting delivery Delivering investment efficiently

© Pennon Group plc 2020 26 South Efficient financing – driving performance West Water 2.5% effective interest H1 2020/21 • Lower than Ofwat’s nominal cost of debt SWW effective • Over half of the period on period 90bps reduction interest rate in average effective interest rate is linked to active management, with the remainder due to index- 2.5% linked debt • Rolling 10 year hedges for new debt 90bps reduction Water sector interest rates(1) in average interest rate

© Pennon Group plc 2020 (1) No data available for water sector peers H1 2020/21. Data compiled from water sector company annual reports 27 South Delivering for shareholders West Water Strong outperformance in totex and financing Doubling of base returns – maintaining momentum for K7 • Totex efficiencies £34 million in H1 2020/21 H1 2020/21 Return on • Effective interest rate 2.5% – below Ofwat’s Regulated Equity 4.2% nominal cost of debt (RORE)(1) 8.0% 80% of ODIs on track or ahead of target • Targeting net reward for ODIs

Delivering well against Ofwat’s assumed(2) 8.0% RORE of 8.5% in the Final Determination

(1) Annual equivalent WaterShare RORE. Financing outperformance is based on the outturn effective interest rate, translated into an effective real interest rate using cumulative K7 forecast blended inflation © Pennon Group plc 2020 (2) Ofwat Final Determination RORE based on risk ranges for totex (based on historic sector performance), financing (for a notional company) and P10/P90 assessments for ODIs 28 Pennon Customer growth despite challenging Water environment Services Total revenue Revenue EBITDA (external to the Group) £75.3m £36.5m £0.3m H1 2019/20 £86.6m H1 2019/20 £33.1m H1 2019/20 £0.9m

Positive EBITDA despite like for like volume reduction – c.20% demand reduction driven by lockdown

Maintaining focus on targeting high quality, sustainable customer base

£15 million annualised new contract wins through H1 2020/21

Leveraged deep customer knowledge to support customers throughout the COVID-19 pandemic Cash collections remain robust – no requirement to utilise industry support mechanisms

Well positioned for the future

Broadening the base for SWW Building Back Better

• Good start to Isles of Scilly expansion • Supporting the Government’s drive – £36m investment allowed to Build Back Better • Operational team and key suppliers • Sustainable water resources in place • Catchment management • Essential investments underway • Healthier places and environment • Smarter, healthier homes

Pennon Water Services Pennon

• Continued sector growth • Significant headroom for investment • Consistently high quality service • Strong governance enabling provision a key differentiator investment, innovation and sustainable growth

Rated Excellent with a score of 4.9/5 Trusted Collaborative Responsible Progressive

Pennon Group 2019/20 Change

(1) Revenue • Impact of lower tariffs based on K7 Final Determination (c.£20m) £636.7m(2) • Reduced Non-household demand and other services (c.£30m including c.£10m impact from customers outside of the South West Water region) partially offset by increased household demand (c.£15m) as a result of COVID-19 • Non-underlying sharing of outperformance with customers through WaterShare+ of c.£20m

Net debt • Debt retirement of c.£900m from Viridor proceeds £1,122m(3) • Ongoing strategic review on use of proceeds

Current tax rate • Underlying Continuing Group’s effective current tax rate lower than UK headline rate of 19% reflecting 15.6%(4) capital allowances and relief on pension contributions

South West Water – transition to new regulatory period 2019/20 Change

Operating costs • Increased costs reflecting inflation, expansion into the Isles of Scilly, net of continued efficiency £206.1m

Net interest • Efficient financing reflecting lower interest rate swaps – effective rate reduction £71.4m

Capex • Capital expenditure reflects K7 profile of investment – 2019/20 included advancement of investment £161.0m from 2020/21

RORE • Ofwat’s view of assumed potential outperformance 8.5% –

RCV • Reduction due to impact of K7 Final Determination reflecting midnight adjustments of c.£200m, £3,573m driven by the significant totex outperformance in K6

Pennon Water Services 2019/20 Change

Operating costs • Reduction in operating costs as a result of lower wholesale charges due to COVID-19 £171.6m (c.£10m impact from customers outside of the South West Water region)

EBITDA • Impact of reduced Non-household demand on margins £1.9m • Focus on continued cost efficiency with strong collections offsetting potential bad debt impact of COVID-19

(1) c.£38 million wholesale cost of capital reset offset by wholesale revenue forecasting incentive mechanism and other regulatory true up mechanisms (2) 2019/20 revenue for the Continuing Group (3) £822 million net debt as at 31 March 2020 plus £300 million in perpetual securities, repaid May 2020 © Pennon Group plc 2020 (4) 2019/20 effective current tax rate rebased to reflect the Continuing Group 33 Pennon Disciplined approach to assessing potential opportunities

Significant value potential for shareholders from reinvestment of proceeds into the UK water sector

Extensive work to narrow down a number of potential opportunities and continue to assess whether they are executable and can deliver attractive financial returns

Value from any acquisition would be driven by our ability to deliver totex outperformance, financial efficiency, synergies and growth

We have a highly disciplined approach to assessing all opportunities • Earnings accretion • Value creation – impact on shareholder returns, income and growth, as well as the impact on customers and other stakeholders • Benchmarked against a return of capital to shareholders

If a compelling value creating opportunity is not available, capital will be returned to shareholders

Underlying continuing operations(1) H1 2020/21 H1 2019/20 Change (£m) (restated) (2)

Revenue 319.7 325.8 (1.9%) Results EBITDA 174.5 191.5 (8.9%) in line with Operating profit management 114.8 132.0 (13.0%) expectations Profit before tax 86.7 101.4 (14.5%) Non-underlying items before tax(3) (24.8) 18.0 - K7 revenue Profit before tax 61.9 119.4 (48.2%) reset Tax (11.5) (25.5) +54.9% Profit from continuing operations 50.4 93.9 (46.3%) Sale of Viridor Profit for the period from discontinued operations 1,720.0 39.6 - completed Profit after tax for the period 1,770.4 133.5 +1,226.1% Statutory Earnings Per Share (p) 420.9 30.1 +1,289.3% Sector leading – Adjusted EPS continuing operations (p) (4) 17.9 20.1 (10.9%)

K7 dividend (4) policy – Adjusted EPS continuing & discontinued operations (p) 29.0 31.1 (6.8%) Dividend Per Share (p)(5) 6.77 13.66 N/A

(1) Measures presented are presented before non-underlying items (2) Restated H1 2019/20 figures reflect contribution to continuing Pennon Group operations (3) Non-underlying items are adjusted for by virtue of their size, nature or incidence to enable a full understanding of financial performance (4) Adjusted EPS: before deferred tax and non-underlying items © Pennon Group plc 2020 (5) Dividend policy of CPIH +2%. CPIH 0.7% at 30 September 2020 35 Pennon Income statement

H1 2020/21 £m A Continuing Group profit Underlying profit before tax A 86.7 before tax reflects transition Non-underlying profit before tax(1) B (24.8) to K7 Tax (charge) / credit (11.5) B Continuing Group Continuing Continuing Group profit after tax 50.4 WaterShare+ and closure of defined benefit pension Underlying profit before tax C 47.4 scheme to future accrual Underlying tax (charge) / credit (8.2) C Underlying profit after tax 39.2 Discontinued operations

(1) underlying profit before tax Non-underlying items : reflects trading to disposal

Discontinued operations Profit on sale of Viridor D 1,729.3 D Retirement of Pennon company debt E (56.8) Tax exemption on disposal (2) Other (0.6) proceeds(3) Tax (charge) / credit 8.9 E Non-underlying profit after tax 1,660.8 Debt right-sizing well Total Group statutory profit after tax 1,770.4 progressed – c.£0.75 billion repaid to date

(1) Non-underlying items are adjusted by virtue of their size, nature or incidence to enable a full understanding of financial performance (2) Includes restructuring costs of (£6.0m), Pension settlement credit of £6.0m, and share based costs (£0.6m) © Pennon Group plc 2020 (3) Reflect Substantial Shareholder Exemption (SSE) 36 Pennon Corporation tax – transparent tax strategy

Corporation tax H1 2020/21 H1 2019/20 (£m) (restated)(2)

Current year Current tax (12.4) (14.2) Fair Tax Mark reflects Deferred tax (4.2) (5.3) our contribution to (16.6) (19.5) society through our Prior year responsible approach Current tax 0.8 0.8 to tax Deferred tax (0.5) (2.0) • Current year current tax 0.3 (1.2) effective rate of 14.3% in H1 2020/21 – consistent Total underlying tax (16.3) (20.7) with the prior period Non-underlying items(1) 4.8 (4.8) (H1 2019/20 14.0%)

Total tax (11.5) (25.5) • Lower than the UK headline rate of 19%, Discontinued operations 0.7 (4.1) statutory tax reflecting capital Total statutory tax (10.8) (29.6) allowances resulting in deferred tax charge in current period.

(1) £3.9m current tax credit and £0.9m deferred tax credit © Pennon Group plc 2020 (2) Restated H1 2019/20 figures reflect contribution to continuing Pennon Group operations 37 Pennon Income statement – Adjusted EPS reconciliation

Adjusted EPS H1 2020/21 H1 2019/20 (£m unless stated) (restated)(2)

Profit before tax 61.9 119.4 Adjusted for:

Non-underlying items (pre-tax) 24.8 (18.0) Current tax (11.6) (13.4) Hybrid charge - (3.5) Minority interest(1) 0.2 0.1 Profit for adjusted EPS calc. 75.3 84.6 Average number of shares (m) 420.7 420.0 Adjusted EPS (p) 17.9 20.1

Discontinued operations profit before tax 1,719.3 43.7 Non-underlying items (pre-tax) (1,671.9) (2.2) Current tax (0.6) 4.6 Profit for adjusted EPS calc. 46.8 46.1 Average number of shares (m) 420.7 420.0 Adjusted EPS (p) 11.1 11.0

Total Group adjusted EPS (p) 29.0 31.1

(1) Reflects the impact of the non-controlling interest in Pennon Water Services © Pennon Group plc 2020 (2) Restated H1 2019/20 figures reflect contribution to continuing Group operations 38 Pennon Balance sheet – Group capital expenditure

Group capital investment H1 2020/21 H1 2019/20 (£m) (restated)(1)

South West Water 73.3 77.6 Clean Water 40.9 44.0 Wastewater 32.4 33.6 Other Group 0.2 - Capital additions 73.5 77.6

Discontinued operations 36.7 94.4(2) Total Group capital investment 110.2 172.0

Group capital payments (£m)

Group capital additions 73.5 77.6 Capital creditor/decrease (incl. non-cash items) 8.1 16.0 Grants and contributions (0.8) (1.8) Proceeds from sale of PPE - (1.4) Group capital payments 80.8 90.4 Discontinued operations 32.3 102.5(2) Total Group capital payments 113.1 192.9

(1) Restated H1 2019/20 figures reflect contribution to continuing Pennon Group operations © Pennon Group plc 2020 (2) H1 2019/20 includes £8.8m Viridor capital additions on IFRIC 12 ERF capital assets 39 Pennon Balance sheet – Sustainable, diversified funding sources

Balance as at 30 September 2020 Pennon South West (£m) Group Water

Finance leasing 1,439 1,439 Bank bilaterals 284 135 European Investment Bank loans 251 251 Index-linked bonds 489 443 Fixed rate (SWW 2040) bond 135 135 Private placements 435 100 Total debt 3,033 2,503 Less: cash/liquid investments (3,071) (292) Net borrowings (38) 2,211

Pensions 30 September 31 March (£m) 2020 2020 Responsible Pension schemes’ assets 916 934 employer 968 contributions Pension schemes’ liabilities 943 of £36m in Net pension scheme’s (52) assets/(liabilities) (9) H1 2020/21

Tax 10 2

Net of tax pension scheme’s (42) (7) Net post-tax assets/(liabilities) liability represents c.1% of Group market capitalisation

Falling gilt yields driving net deficit increase of £36m – mitigated by employer contributions

Balance as at 30 September 2020 South West Water (£m) Book value Fair value Difference Bank bilaterals 186 186 - European Investment Bank loans 251 238 13 Index-linked bonds 393 581 (188) Fixed rate (SWW 2040) bond 135 206 (71) Private placements 100 100 - Total debt (excluding leases) 1,065 1,311 (246) Leases(2) 1,439 1,355 84 Total borrowings 2,504 2,666 (162)

Pennon Group

Bank bilaterals 342 352 (10) European Investment Bank loans 251 238 13 Index-linked bonds 438 581 (143) Fixed rate (SWW 2040) bond 135 206 (71) Private placements(1) 428 453 (25) Total debt (excluding leases) 1,594 1,830 (236) Leases(2) 1,439 1,355 84 Total borrowings 3,033 3,185 (152)

(1) Includes £6m of other borrowings related to Pennon Water Services © Pennon Group plc 2020 (2) Includes £36m of operating leases under IFRS 16: Leases 42 South Resilient performance despite challenges West from global pandemic Water Underlying(1) H1 2020/21 H1 2019/20 Change (£m)

Revenue(2) 282.9 292.9 (3.4%) K7 revenue Operating costs (106.8) (102.3) (4.4%) reset EBITDA 176.1 190.6 (7.6%) Depreciation and amortisation Non-household (59.3) (59.1) (0.3%) demand reduction Operating profit 116.8 131.5 (11.2%) largely offset Net interest (28.3) (35.3) +19.8% by Household Profit before tax 88.5 96.2 (8.0%) demand increase Non-underlying items (24.0) 18.0 - Profit before tax 64.5 114.2 (43.5%)

Continued totex Capital expenditure 73.3 77.6 (5.5%) and financing outperformance WaterShare RORE(3) Ofwat RORE(4) H1 2020/21 H1 2020/21 8.0% 7.1%

(1) Measures presented are presented before non-underlying items (2) Includes wholesale revenue for Non-household customers (3) Financing outperformance based on the outturn effective interest rate on net debt translated into an effective real interest rate using cumulative K7 forecast blended inflation © Pennon Group plc 2020 (4) Financing outperformance calculated based on full year equivalent forecast blended inflation 43 South Net interest analysis West Water South West Water H1 2020/21 H1 2019/20 (£m) 2.5% Net interest charge: (27.6) (35.3) South West Water Less: pensions net interest - 0.4 effective interest rate

Add: capitalised interest (0.6) (1.6)

Net interest for average rate calculation (28.2) (36.5) Split between: Lower charge reflecting lower Interest payable (28.1) (37.2) inflation environment Capitalised interest payable (0.6) (1.6)

Other finance income 0.5 2.3 Net interest payable: (28.2) (36.5) Increased Average rate of interest(1) 2.5% 3.4% interest cover Net interest cover (times)(2) 4.2x 3.8x

(1) A measure of the mean average interest rate payable on South West Water Limited’s net debt, which excludes interest costs not directly associated with South West Water net debt © Pennon Group plc 2020 (2) Underlying South West Water net finance costs (excluding pensions net interest cost) divided by South West Water operating profit before non-underlying items 44 South Financial Outcome Delivery Incentives – West H1 2020/21 Water Performance on-track / Marginally Area ahead of target below target of focus

Bespoke • External sewer flooding • Water restrictions • Sludge compliance • EPA score ODIs • Sewer blockages • Scheme delivery • Wastewater • Wastewater resilience (3 ODIs) operational contacts • Bathing water quality • Customer value for money • Water pollution incidents • Water resilience • Customers on support tariffs • Total WWTW • Water operational compliance contacts • Retail voids • AMR meters • Customers who find • Biodiversity their bill affordable • Odour contacts • Satisfaction in PSR services • Descriptive compliance • Inclusive service provision • Taste, smell and odour contacts • Biodiversity – compliance • Abstraction incentive • Biodiversity – preventing mechanism deterioration

Common • Sewer collapses • C-Mex • WWTW compliance • Per Capita ODIs • Leakage • D-Mex Consumption • Main repairs • Priority Services • Water Quality • Risk of severe drought • Unplanned outage • Risk of sewer flooding

Comparative • Internal sewer flooding • Supply interruptions • Wastewater pollution ODIs incidents

© Pennon Group plc 2020 46 South Sharing outperformance with customers West Water Continuing to share financial benefits with customers – building on the success of WaterShare+ • Only company to share embedded debt outperformance • Delivering totex savings for the benefit of customers and shareholders

Giving customers a greater say • WaterShare+ Advisory Panel – guiding priority areas for investment • Dedicated customer Annual General Meeting

Customer Shareholder H1 2020/21 H1 2020/21 £m £m 14 Net totex savings(1) 14 0 ODIs (1) 2 Other items(2) 0 16 Total Value Benefit 13

(1) Gross totex savings (inclusive of retail), net of tax for sharing and performance purposes © Pennon Group plc 2020 (2) Other items including financing outperformance on embedded debt net of other items including the impact of new legislation 47 South Reconciliation of WaterShare RORE H1 2020/21 West Water Totex outperformance of £34.0 million(1) Totex H1 2020/21 • One third delivered through operating cost savings, £m remainder delivered through capital efficiencies Operating costs 107 Capital Expenditure 73 Financing outperformance(2) of £27 million Totex 180 • Effective interest rate 2.5% compared to Ofwat’s Totex allowance 214 nominal allowed cost of debt of 4.2% Totex saving 34 RORE benefit 14 ODI performance PR19 Final WaterShare • Net penalty of £1.3 million Determination(4) RORE • Rewards: bathing water quality, sewer blockages and biodiversity • Penalties: wastewater pollution incidents and EPA score 3.9% Regulated Equity • 60% notional gearing • 2020/21 average RCV of £3,229 million in K7 Final Determination prices(3)

(1) Phasing of actual expenditure compared to the planned programme is reflected prior to calculating totex savings (2) WaterShare financing outperformance is based on the outturn effective interest rate on net debt, translated into an effective real interest rate using cumulative K7 forecast RPI/CPIH blended inflation of 2.4% (3) K7 Final Determination based on 2017/18 CPIH deflated prices. RCV incudes the impact of IFRS 16: Leases omitted by Ofwat in South West Water’s Final Determination © Pennon Group plc 2020 (4) Ofwat Final Determination RORE based on risk ranges for totex (based on historic sector performance), financing (for a notional company) and P10/P90 assessments for ODIs 48 Pennon Focused cost efficiencies Water in a competitive market Services(1) Underlying(2) H1 2020/21 H1 2019/20 Change (£m) Business wins Revenue 75.3 86.6 (13.0%) underpinning SWW wholesale elimination (38.8) (53.5) (27.5%) revenue Revenue – external to the Group 36.5 33.1 +10.3% Operating costs (75.0) (85.7) +12.5% Revenue SWW wholesale elimination 38.8 53.5 +27.5% impacted by Operating costs – external to the Group (36.2) (32.2) (12.4%) Covid-19 EBITDA 0.3 0.9 (66.7%) Depreciation and amortisation (0.4) (0.3) (33.3%) Stable cost Operating profit (0.1) 0.6 (116.7%) base Net interest (0.8) (0.9) +11.1% Loss before tax (0.9) (0.3) (200.0%) Supporting Non-underlying items - - - our customers Loss before tax (0.9) (0.3) (200.0%) and employees Capital expenditure 0.2 0.1 +100.0%

(1) 80:20 Joint Venture with South Staffordshire Group. Net interest charge payable to Group companies, including parent company guarantee © Pennon Group plc 2020 (2) Before non-underlying items 49 Half Year Results 2020/21

North America Roadshow – Dec 2020