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May 24 (Reuters) - British water supplier Severn Trent plans capital investment of up to 1 billion pounds ($1.3 billion) to boost its environmental standards and expand its network, it said on Wednesday, as the sector faces increased regulatory scrutiny.
The announcement in a statement comes a day after British water industry regulator Ofwat said it had started an enforcement investigation into Severn Trent rival Pennon's South West Water, relating to its leakage performance.
Water companies have come under increasing political and regulatory focus, along with public anger, over the last year over conditions of infrastructure and the dumping of raw sewage.
Severn, which on Wednesday reported a small rise in profit for its 2022/23 fiscal year, said it was on track to deliver a net zero waste water treatment hub in 2024 and doubled its biodiversity targets to 10,000 hectares by 2025.
"We are expecting the biggest investment period the sector has ever seen, with a focus on water resources, improving environmental standards and on Net Zero," CEO Liv Garfield said in a statement. She did not elaborate.
Severn, which was formed in 1974 and provides water services in England and Wales, said it expects strong earnings growth in 2023-2024 betting on a 15-20% reduction in its interest charge in 2024 and on lower energy costs.
The group saw its profit before interest and tax up 0.5% at 508.8 million pounds for the year ended in March, with its turnover up 11.4% at 2.17 billion pounds.
Shares in the company were down 2.5%, with London's blue chip index FTSE 100 down 1.5% at 0840 GMT.
Analysts at Credit Suisse said that the company was better-positioned than peers United Utilities and Pennon to weather the tough industry.
United Utilities will report annual results on Thursday, while Pennon is scheduled to report on June 1. ($1 = 0.7923 pounds) (Reporting by Radhika Anilkumar in Bengaluru; Editing by Sherry Jacob-Phillips and Emelia Sithole-Matarise)
