LONDON: British water regulators are set to confirm price cuts next week, cheering consumers but ignoring pleas from companies who may need to cut dividends and raise hundreds of millions of pounds from shareholders as a result.

In a draft five-year plan published in July, Ofwat surprised water providers such as United Utilities, Severn Trent, Pennon and Northumbrian Water by calling on them to cut bills, rather than permitting increases.

“There could be some scope for Ofwat’s proposals to improve ... although we see a dramatic change in the outcome as unlikely,” said Deutsche Bank analyst James Brand.

July’s draft also said the water companies would only be able to make a return on capital of 4.5 percent, calling into question their status as reliable dividend stocks and sparking a sell-off in the sector. The move prompted ratings agency Standard Poor’s to place Severn Trent and United Utilities, along with unlisted Sutton and East Surrey, on credit watch with negative implications.

The agency said their current ratings could be vulnerable unless the companies resorted to measures such as reducing shareholder payouts, thereby sidestepping the risk of downgrades that would raise borrowing costs and further erode returns.

Fitch meanwhile said the draft contained “more sticks than carrots”. It believes downgrades are unlikely but the sector’s financial flexibility would be constrained.

United Utilities, which supplies 7 million people across northwest England, has subsequently raised cash by selling stakes in two assets for about $216m.

Shares in the sector have failed to keep pace with a rising market since the draft too. Pennon and United Utilities have underperformed the British bluechip index by 16 percent, Northumbrian by 13 percent and Severn Trent by 11 percent. In what one analyst has dubbed “the big water week”, the stage for Ofwat’s Nov. 26 ruling will be set by first half results from Northumbrian on Monday, Severn Trent on Tuesday and United Utilities on Wednesday.

The figures are expected to lend some support to Ofwat’s belief that water companies can afford to return some of the benefits of low borrowing costs to customers.

Despite falling water demand from recession-hit businesses, Deutsche Bank’s Brand expects Severn Trent to post a 20 percent jump in adjusted pretax profit to 186 million pounds ($310m), helped by price rises and lower interest charges.

He expects United Utilities to report a more modest 4 percent rise in pretax profit to €263m as price rises of 6 percent.