Severn Trent Regulatory News (SVT)

Severn Trent Plc

PR19 Final Determination Update for Severn Trent Water and Hafren Dyfrdwy

Ofwat has today published its final determination on the PR19 plans for both Severn Trent Water and Hafren Dyfrdwy.

We are pleased Ofwat has approached the final determination 'in the round'. 

In respect of Severn Trent Water, our Totex allowance increased by a further £91m over the next five years (in addition to the £100m increase we received in the updated cost modelling in July) in part reflecting a reduction in the annual shift in the frontier efficiency target from 1.5% to 1.1%.

The benefit of this has been offset by a number of other adjustments including notably the reduction in wholesale WACC of 16bps (reducing revenue by c.£75m over the next five years) and a reduction to the RCV run-off1 (worth c.£40m over AMP7 but value neutral in the long term, as seen by an increase in our AMP7 RCV growth to 3.8%).

We estimate the changes since July 2019 mean an overall reduction of c.£50m in total revenue for AMP7.

We welcome the positive adjustments Ofwat has made to the targets for our Supply Interruptions, CRI2 and Mains Repairs customer ODI measures for AMP7. In combination these changes will have the effect of de-risking our plan, as reflected in the movement on our P10/P90 ranges3 from

-3.9%/+1.7% to -2.83%/+1.9%.

On Hafren Dyfrdwy, we are pleased to note that revenue will increase by £3.6m across the next five years, and we will benefit from a number of positive customer ODI adjustments including those above.

We have until 15th February 2020 to consider the final determinations in full and respond to Ofwat.

1 RCV run-off is a measure of the annual depreciation of the RCV to reflect the long-term nature of the benefit to customers of the previous investment a company has made in its assets

2 CRI - Customer ODI based on the DWI Compliance Risk Index (CRI) is a measure designed to illustrate the risk arising from treated water compliance failures

3 The P90 and P10 are points on a risk distribution. The P90 points means there is only a 10% expected chance that the outturn RoRE will be above the threshold provided

Enquiries

Investors & Analysts

Media

Cautionary statement regarding forward-looking statements

This document 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 document 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 document 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 written or verbal forward-looking statements, made in this document or made subsequently, 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. No assurances can be given that the forward-looking statements in this document will be realised. This document 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 document should be regarded as a profits forecast.

This document is not an offer to sell, exchange or transfer any securities of Severn Trent Plc or any of its subsidiaries and is not soliciting an offer to purchase, exchange or transfer such 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).