29 September 2023
Severn Trent Plc
(“Severn Trent”, the “Company” or the “Group”)
Proposed Placing Of New Ordinary Shares
Severn Trent today announces an equity issue to raise gross proceeds of approximately £1 billion (the “Equity Issue“). The Equity Issue comprises the issue of new ordinary shares of 9717/19 pence each in the capital of the Company (“New Ordinary Shares“) through:
| · | a non-pre-emptive placing to institutional investors by the issue of New Ordinary Shares (the “Placing Shares“) at the Placing Price (the “Placing“) to raise gross proceeds of approximately £500 million; |
| · | an investment from Qatar Investment Authority (“QIA”) of £500 million, pursuant to which QIA has committed to subscribe for New Ordinary Shares (the “Subscription Shares“) at the Placing Price (the “Subscription“); |
| · | a separate offer, in conjunction with the Placing, made today by the Company of New Ordinary Shares (the “Retail Offer Shares“) at the Placing Price (the “Retail Offer“) via PrimaryBid, to provide retail investors in the United Kingdom with an opportunity to acquire Retail Offer Shares, contributing up to the GBP equivalent of €8 million. A separate announcement will be made shortly regarding the Retail Offer and its terms; and |
| · | the intended subscription by certain directors of the Company for New Ordinary Shares (the “Director Subscription Shares“) at the Placing Price (the “Director Subscription“), contributing approximately £275,000 in total. |
The Placing will be conducted through an accelerated bookbuilding process (the “Bookbuild“) which will be launched immediately following this announcement.
Together, the total number of New Ordinary Shares are expected to represent approximately 19 per cent. of the existing issued share capital of the Company.
Rationale For The Equity Issue And Use Of Proceeds
Concurrently with this announcement, Severn Trent has today published an Investor Summary of the business plan for its subsidiary Severn Trent Water for the regulatory period beginning 1 April 2025 until 31 March 2030 (“AMP8“) which it intends to submit to Ofwat on 2 October 2023.
This ambitious plan builds on Severn Trent’s strong track record of operational and financial outperformance and will deliver for customers, the environment, the region and shareholders, consolidating Severn Trent’s position as sector leader.
In particular, the business plan and associated Equity Issue:
| · | Include a step-change in investment, with £12.9 billion of total expenditure in real terms (including £5.0 billion of enhancement expenditure), driving 31% real RCV growth over AMP8 |
| · | Provide a platform to continue Severn Trent’s strong track record across the three pillars of RoRE outperformance: Totex, ODIs, and financing |
| · | Ensure Severn Trent Water is responsibly funded from the outset, with average gearing of 65.2% expected for AMP8 as Severn Trent continues to target investment grade credit rating of BBB+/Baa1 for Severn Trent Water |
| · | Enable investment in the outcomes Severn Trent’s customers prioritise the most, including a substantial programme of sustainability-led investment and step change reductions in key measures including leakage, pollutions and storm overflow spills |
The Equity Issue also allows Severn Trent to accelerate its investment through utilisation of the two year transition period where approximately £400 million has been earmarked and positions Severn Trent to deliver through the AMP8 period.
The proposed issue and allotment of the New Ordinary Shares is within the existing shareholder authorities granted to the Company at its Annual General Meeting held on 6 July 2023. The board of directors of the Company believes that the Placing, Subscription, Retail Offer and Director Subscription are in the best interests of shareholders and the Company’s wider stakeholders.
Details Of The Placing
Prior to launch of the Placing, the Company consulted with a significant number of its shareholders to assess their feedback as to the purpose of the Placing. Feedback from this consultation was supportive and as a result the Board has concluded that the Placing is in the best interests of shareholders and wider stakeholders and will promote the long-term success of the Company. Accordingly, the Company has chosen to proceed with the Placing.
Merrill Lynch International (“BofA Securities“) and Morgan Stanley & Co. International (“Morgan Stanley“) are acting as Joint Global Coordinators, Joint Bookrunners and Joint Corporate Brokers, and Citigroup Global Markets Limited (“Citi“) is acting as Joint Bookrunner (together with BofA Securities and Morgan Stanley, the “Joint Bookrunners“) in connection with the Placing.
Rothschild & Co is acting as Financial Adviser to the Company.
The Placing is subject to the terms and conditions set out in the Appendix to this announcement (which forms part of this announcement, such announcement and the Appendix together being the “Announcement“). The Joint Bookrunners will today commence the Bookbuild in respect of the Placing. The price per ordinary share at which the Placing Shares are to be placed (the “Placing Price“) will be decided at the close of the Bookbuild. The book will open with immediate effect following this Announcement. The timing of the closing of the book, pricing and allocations are at the discretion of the Joint Bookrunners and Severn Trent. Details of the Placing Price, the number of Placing Shares, Subscription Shares, Retail Offer Shares and Director Subscription Shares will be announced as soon as practicable after the close of the Bookbuild.
The New Ordinary Shares if issued, will be fully paid and will rank pari passu in all respects with the existing ordinary shares of the Company, including the right to receive all dividends and other distributions declared, made or paid after the date of issue.
Application will be made for the New Ordinary Shares to be admitted to the premium listing segment of the Official List (the “Official List“) of the Financial Conduct Authority (the “FCA“) and to be admitted to trading on the main market for listed securities of the London Stock Exchange plc (the “London Stock Exchange“) (together, “Admission“). Settlement of the New Ordinary Shares and Admission are expected to take place on or around 8.00 a.m. on 3 October 2023.
The Placing is conditional, among other things, upon Admission becoming effective and the placing agreement between the Company and the Joint Bookrunners (the “Placing Agreement“) not being terminated in accordance with its terms. The Appendix sets out further information relating to the Bookbuild and the terms and conditions of the Placing.
On 29 September 2023, the Company entered into a subscription agreement with Qatar Holding LLC (the “Subscription Agreement“) pursuant to which QIA committed to subscribe £500 million for Subscription Shares at the Placing Price, subject to the terms of the Subscription Agreement, including certain limits on the Placing Price. The Subscription is conditional on, among other things, neither the Subscription Agreement nor the Placing Agreement having been terminated on or before Admission, the Company raising gross proceeds of at least £1 billion from the Equity Issue, and Admission becoming effective. Pursuant to the Subscription Agreement, QIA has agreed to a lock-up for a period of 90 days following Admission in respect of the Subscription Shares, subject to customary carve-outs and waiver by the Company.
The Retail Offer will be made on the terms outlined in a separate announcement to be made shortly. The Retail Offer is conditional on the Placing, but the Placing is not conditional on the Retail Offer.
The Director Subscription Shares will be subscribed for on the basis agreed pursuant to subscription letters between certain directors of the Company and the Company, rather than pursuant to the terms and conditions of the Placing contained in the Appendix to this Announcement.
About QIA
Qatar Investment Authority is the sovereign wealth fund of the State of Qatar. QIA was founded in 2005 to invest and manage the state reserve funds. QIA is among the largest and most active sovereign wealth funds globally. QIA invests across a wide range of asset classes and regions as well as in partnership with leading institutions around the world to build a global and diversified investment portfolio with a long-term perspective that can deliver sustainable returns and contribute to the prosperity of the State of Qatar
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.