TIDMSVT
RNS Number : 0794O
Severn Trent PLC
29 September 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
For immediate release
29 September 2023
Severn Trent proposes record levels of investment with
transformational Business Plan
-- Severn Trent plans GBP12.9 billion total expenditure across
the next five-year regulatory period, driving 31% real RCV growth;
record investment programme expected to create 7,000 jobs across
the Midlands
-- Sustainability-led plan includes significant progress on
customer priorities, including 30% reduction in storm overflow
spills, 30% reduction in pollutions and 16% reduction in
leakage
-- Affordability a key focus, with GBP550 million package to
support 693,000 customers who might otherwise struggle to pay their
bill
-- Severn Trent today launches non-pre-emptive equity placing to
raise GBP1 billion, supporting this investment, while maintaining
strong financial resilience
Severn Trent Plc has today published a summary of the Business
Plan for Severn Trent Water for the regulatory period beginning 1
April 2025 and ending 31 March 2030 ("AMP8"). The full Business
Plan will be submitted to Ofwat on 2 October 2023 but a summary is
published today alongside the announcement of a non-pre-emptive
equity placing to raise approximately GBP1 billion.
The plan builds on Severn Trent's strong delivery track record
and proposes the largest investment programme in the Company's
history. It has been developed to deliver for customers, the
environment, the region and shareholders and has been judged as
acceptable by 76% of customers surveyed.
Record programme of investment in the environment and areas our
customers care about
The plan includes GBP12.9 billion of total expenditure across
our network, including GBP5.0 billion of investment focused on
enhancing capacity and service beyond current levels, almost all of
which is focused on the environment.
The scale of the plan means that for every household Severn
Trent serves, we will invest GBP2,400 back into the region,
delivering a further step-change in service for more than four
million customers across the Midlands.
This will push the sector forward on the measures that our
customers care about most, including a 16% reduction in leakage and
a 30% reduction in spills from storm overflows, putting us firmly
on track to deliver the Government's 2050 targets at least five
years early. We will also build on our industry-leading
environmental performance, as demonstrated by our 4* EPA status, by
driving a further 30% reduction in pollutions.
We will invest GBP5 billion in a range of exciting projects,
including:
-- GBP3 billion in transforming the natural environment through
our WINEP ('Water Industry National Environmental Programme'),
delivering a range of sustainable outcomes, including addressing
99% of the reasons attributed to our operations for rivers not
being in good ecological status;
-- GBP0.7 billion in securing new water resources, adding over
200 million litres of water per day, helping to protect customers
supplies now and provide resilience for the long term; and
-- GBP0.4 billion in playing our part in the decarbonisation
journey, eliminating 240,000 tonnes of CO2e and delivering
operational Net Zero by 2030.
The plan is expected to create up to 7,000 jobs directly in the
business and our supply chain and will also enable thousands of new
work experience placements, apprenticeships and internships.
We are consistently named in the top category for financial
resilience by Ofwat and this remains a clear priority for us. So
today we are launching a non-pre-emptive equity placing to raise
approximately GBP1 billion to ensure we can deliver this scale
investment programme responsibly, with average gearing of 65% over
the regulatory period, as we target maintaining current credit
ratings of BBB+/Baa1 for Severn Trent Water.
Supporting our customers and delivering an affordable plan
The plan has been developed to balance the need for scale
investment and sector-leading ambition whilst committing to keep
bills affordable. Extensive customer research has shown that 76% of
customers support our business plan, including the proposed
investment in secure water supplies, the improvements to rivers and
the cost of the bill over the five-year period.
Under the plan and calculated at 2022/23 prices, the average
annual household bill will be GBP518 by 2029/30 (2024/25: GBP379),
an average monthly increase of GBP2.32 over the five-year period.
At the 2030 levels, the bill is forecast to account for 1.3% of the
disposal income of a median household in the Severn Trent region,
against a figure of 1.2% today.
Severn Trent recognises that while this increase is spread over
a long period, today's announcement comes at a difficult time for
some customers. That is why we have included a GBP550 million
financial support package as a core part of the plan. This will
help 693,000 customers pay their bill each year by 2030, the
equivalent of one in seven customers across the region who will not
have to pay a full water and wastewater bill. The number of our
customers expected to benefit from financial support exceeds those
forecast to be in water poverty by 2030.
Liv Garfield, CEO at Severn Trent, said of the investment plan:
"By 2030 we will have transformed our network to provide our
customers with the very best service. At the heart of this ambition
is a commitment to a sustainable future - from healthier rivers, to
providing thousands of jobs, fewer leaks and a water supply ready
for the impacts of climate change and population growth. At the
same time, our GBP550 million affordability scheme aims to ensure
no customer in our region needs to worry about affording their
water bill.
We've listened hard to our customers - not only will we make
sure we keep building on our sector-leading track record, but we
will also work to make our region proud of their water company.
This investment will contribute to our positive economic,
environmental and social impact in the communities we serve for
decades to come."
Performance on track, setting us up for a successful AMP8
Overall, we have made a good start to the financial year and
operationally we continue to deliver a strong service for our
customers, remaining on track to deliver at least GBP50 million in
Customer ODIs this year. We are also progressing well against our
end-of-AMP ODIs which are expected to deliver GBP40-GBP50 million
on top of in-year net rewards for the last year of AMP7.
Inflation forecasts have increased since our full year results
presentation on 24 May 2023 which will benefit both RCV and
returns, though the expected reduction in finance costs will be
less than previously guided as a result.
As we continue to step up our capital programme ahead of our
substantial investment plan for AMP8, we now expect capital
investment to outturn towards the top end of our guidance range, at
around GBP1 billion, keeping us on track to exit AMP7 on the right
run rate.
Further information
An investor summary of the Business Plan, together with key data
tables and a pre-recorded presentation by Liv Garfield, CEO, and
Helen Miles, CFO, can be found on the Severn Trent website:
www.severntrent.com/investors
On 12 October 2023 we will bring our plan to life at our Capital
Markets Day in Coventry City Centre. If you would like to attend
please email investorrelations@severntrent.co.uk
The person responsible for making this announcement on behalf of
the Company is Hannah Woodall-Pagan, Group Company Secretary
This announcement should be read in its entirety. In particular,
you should read and understand the information provided in the
"Important Notices" section of this announcement.
Enquiries
Investors & Analysts
Rachel Martin, Severn Trent Plc +44 (0)7824 624
Head of Investor Relations 011
Media enquiries:
Jonathan Sibun, Teneo +44 (0)20 7353 4200
Press Office, Severn Trent Plc +44 (0)24 7771 5640
Important notices
This announcement does not constitute or form part of, and
should not be construed as, any offer, invitation or recommendation
to purchase, sell or subscribe for any securities in any
jurisdiction. Securities may not be offered, sold or transferred in
the United States absent registration or an applicable exemption
from the registration requirements of the US Securities Act of 1933
(as amended) (the "Securities Act"). The securities of the Company
have not been and will not be registered under the Securities Act.
This announcement does not purport to contain all of the
information that may be required to evaluate any investment in
Severn Trent Plc or any of its securities and should not be relied
upon to form the basis of, or be relied on in connection with, any
contract or commitment or investment decision whatsoever.
The information and opinions contained in this announcement are
provided as at the date of this announcement, have not been
independently verified and are subject to change without
notice.
This announcement contains statements that are, or may be deemed
to be, 'forward-looking statements' with respect to Severn Trent's
financial condition, results of operations and business and certain
of Severn Trent's plans and objectives with respect to these
items.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
'anticipates', 'aims', 'due', 'could', 'may', 'will', 'would',
'should', 'expects', 'believes', 'intends', 'plans', 'projects',
'potential', 'reasonably possible', 'targets', 'goal', 'estimates'
or words with a similar meaning, and, in each case, their negative
or other variations or comparable terminology. Any forward-looking
statements in this announcement are based on Severn Trent's current
expectations and, by their very nature, forward-looking statements
are inherently unpredictable, speculative and involve risk and
uncertainty because they relate to events and depend on
circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future
performance and no assurances can be given that the forward-looking
statements in this announcement will be realised. There are a
number of factors, many of which are beyond Severn Trent's control
that could cause actual results, performance and developments to
differ materially from those expressed or implied by these
forward-looking statements. These factors include, but are not
limited to: the Principal Risks disclosed in our latest Annual
Report and Accounts (which have not been updated since the date of
its publication); changes in the economies and markets in which the
group operates; changes in the regulatory and competition
frameworks in which the group operates; the impact of legal or
other proceedings against or which affect the group; and changes in
interest and exchange rates.
All forward-looking statements made in this announcement which
are attributable to Severn Trent or any other member of the group
or persons acting on their behalf are expressly qualified in their
entirety by the factors referred to above. The final PR24 Business
Plan is subject to approval by Ofwat and there can be no assurance
that the PR24 Business Plan will be approved, in whole or in part,
and, as a result, no assurances can be given that the
forward-looking statements in this announcement will be realised.
This announcement speaks as at the date of publication. Save as
required by applicable laws and regulations, Severn Trent does not
intend to update any forward-looking statements and does not
undertake any obligation to do so. Past performance of securities
of Severn Trent Plc cannot be relied upon as a guide to the future
performance of securities of Severn Trent Plc. Nothing in this
announcement should be regarded as a profit forecast.
Certain information contained herein is based on management
estimates and Severn Trent's own internal research. Management
estimates have been made in good faith and represent the current
beliefs of applicable members of Severn Trent's management. While
those management members believe that such estimates and research
are reasonable and reliable, they, and their underlying methodology
and assumptions, have not been verified by any independent source
for accuracy or completeness and are subject to change without
notice, and, by their nature, estimates may not be correct or
complete. Accordingly, no representation or warranty (express or
implied) is given to any recipient of this announcement that such
estimates are correct or complete.
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END
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