Severn Trent Plc Trading Update
Severn Trent Plc today announces the following trading update for the period to 10 July 2024.
PR24 Draft Determination
We look forward to receiving our Draft Determination from Ofwat this morning. Our plan comprehensively addresses the three key areas of deliverability, affordability and financeability. Our proposed record levels of investment will deliver benefits for our customers, the environment and shareholders. As we approach the new regulatory period we are well positioned on financing performance and on ODIs1.
Later today we will issue an initial view of the Determination, followed by a comprehensive view on Tuesday 23 July.
Strong start to the year
Financial performance for the year remains on track and we continue to expect to perform in line with guidance, which includes delivering a net ODI reward in year of over £100 million pre-customer-sharing in 17/18 prices. This would bring our total net ODI reward in AMP72 to around £420 million in nominal prices, reflecting consistent sector-leading performance for customers.
In the first quarter of the year we have delivered over £300 million of capital investment, and remain on track for our guidance of £1.3 billion to £1.5 billion for the year. Our significant investment programme this year and capital run rate position us strongly to deliver a successful capital investment programme through AMP8.
We continue to invest in expanding our energy generation. Following a deal with international solar company Elgin Energy, our Green Power business will invest around £100 million to construct three large-scale solar farms, increasing our energy generation by around 150GWh per year3.
We are highly confident we will be awarded four star status in the Environment Agency’s annual Environmental Performance Assessment4 for an industry-record fifth consecutive year for 2023. We expect confirmation during July. After six months of the current period we are on track for a sixth consecutive year of four star environmental performance.
Addressing spills
Storm overflow spills remain an area of significant focus for our industry. We have the most ambitious improvement plan in the sector, and our teams are in the field every day delivering interventions in our network which will improve 900 storm overflows this year alone. The work we have completed so far gives us confidence that we will be able to halve our spills rate by 2030.
You can stay up to date with the completed solutions as they are implemented by following a public playlist we have released on YouTube
(https://www.youtube.com/playlist?list=PLkGZTG5Vk0IstpCU7IDejVY2uT1J9VPCR)
Footnotes
| 1. Outcome Delivery Incentives (ODIs) – A framework made up of outcomes, measures, targets and incentives which provides companies with rewards for achieving stretching performance targets and compensates customers if performance is below performance targets. Outcome Delivery Incentives are quoted pre-tax and post customer sharing. We assume a 25% rate of corporation tax to be in place when ODIs are taken into revenue. A net reward of £100 million (pre-sharing) would deliver a net reward of £60 million +/- 10% (post-sharing), dependent on the mix of ODI net rewards earned. 2. Asset Management Plan (AMP) – The regulatory cycle is broken up into five year periods known as AMP (Asset Management Plan) periods. The current period is known as AMP7 (2020-2025), and AMP8 refers to the next period of 1 April 2025 to 31 March 2030. The PR24 Business Plan can be found at the following link: Our plans 2025 – 2030 | About Us | Severn Trent Water (stwater.co.uk) |
| 3. Energy generation – In 2023/24 the Severn Trent Plc Group generated the equivalent of 655GWh of energy. |
| 4. Environmental Performance Assessment (EPA) – This is the industry standard measure of the environmental performance of water and sewerage companies (WaSCs), and four star represents the highest rating achievable. It uses measurable environmental indicators to provide a meaningful comparison of performance across the nine WaSCs in England. The 2022 assessment can be found at the following link: https://www.gov.uk/government/publications/water-and-sewerage-companies-in-england-environmental-performance-report-2022. |