The January session of Vallorii’s roundtable series examined whether the investment and regulatory challenges facing the UK water sector foreshadow broader trends across energy, rail, and telecoms. Drawing from Ofwat’s PR24 determinations, the session explored rising capital needs, tighter political scrutiny, and the growing mismatch between cost of capital (CoC) allowances and investor risk exposure.

A key theme was the emergence of an "infrastructure doom loop"—where underinvestment, balance-sheet stress, and poor outcomes reinforce each other. Despite a doubled CapEx envelope for water, minimal changes to WACC suggest deeper structural reform may be needed. Participants assessed new valuation frameworks, including granular, bottom-up risk models that more directly reflect asset-specific uncertainties.

The session also polled attendees on the adequacy of current models and explored how “frontier” regulatory approaches could be pragmatically adapted. Case studies demonstrated how more realistic CoE estimates—for example, based on equity exposure to storm overflow upgrades—might better reflect investor risk and system costs.

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