Severn Trent Regulatory News (SVT)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

7 June 2013

Severn Trent Plc ("Severn Trent")

For Immediate Release

Rejection of LongRiver's Pre-Conditional Possible Offer

The board of directors of Severn Trent (the "Board") announces that it has given careful consideration to the pre-conditional possible offer (the "Proposal") announced today by LongRiver Partners, a consortium led by Borealis Infrastructure Management Inc., and including the Kuwait Investment Office and Universities Superannuation Scheme Limited (together, "LongRiver").

The Proposal is at a price of 2,200p per Severn Trent ordinary share but, as with previous proposals received from LongRiver, assumes that the 45.51p per share final dividend already announced in respect of the year ended 31 March 2013 is not paid to shareholders. If the announced final dividend is paid to shareholders - and Severn Trent ordinary shares are due to go ex-dividend on 19 June 2013 - then the Proposal values each Severn Trent ordinary share at 2,154.49p.

After LongRiver's representatives had informally and in private indicated a series of lower proposals to representatives of Severn Trent, the Proposal was announced unilaterally by LongRiver. The Proposal represents an increase of only 3.5% on LongRiver's previously announced conditional proposal and a premium of only 20.5% to Severn Trent's share price the day before the announcement of LongRiver's interest in Severn Trent.

The Board, having consulted its financial advisers, has unanimously concluded that the Proposal continues to fail to reflect the significant long term value of Severn Trent or to recognise its future potential.

·; Severn Trent has a record of delivering value for both shareholders and customers

·; Severn Trent has delivered total shareholder return of 72% since 1 April 2010, the start of the current regulatory review period, through to 31 March 2013

·; It operates in a well understood and transparent regulatory framework which incentivises companies to invest in water networks and operate them efficiently

·; The inflation-linked nature of its business model provides shareholders with a highly attractive investment at a time of exceptionally low interest rates

Severn Trent has confidence in its future: Severn Trent's RCV is estimated to grow from £7,364m as at 31 March 2013 to £7,997m by 31 March 2015; its policy is to grow dividends to March 2015 by RPI+3% and Severn Trent is well prepared for the next price review and for longer-term developments in the future regulatory landscape for the water industry.

Accordingly, the Board has unanimously rejected this Proposal.

Andrew Duff, the Chairman of Severn Trent, said:

"Throughout this process the Board has been careful to act in the best interest of shareholders. We have held private conversations with LongRiver and made clear that we have no objections to fuller discussions in the event that LongRiver puts forward a proposal which properly reflects the long term value and future potential of Severn Trent.

The Severn Trent Board has carefully considered this Proposal. The Board unanimously believes that this Proposal is not at a level that adequately compensates our existing shareholders for selling Severn Trent's increasingly rare combination of yield, inflation - linked business model and record of operational delivery for customers."

Pursuant to Note 3 to Rule 2.5 of the Takeover Code (the "Code") Severn Trent is required to make clear that this announcement is not being made with the agreement or approval of LongRiver and that there can be no certainty that an offer will be made nor as to the terms on which any offer might be made.

A copy of this announcement can be viewed at www.severntrent.com/possibleoffer

Enquiries:

Severn Trent

Andrew Duff +44 (0) 24 7771 5000

Tony Wray

Rothschild (financial adviser to Severn Trent)Crispin Wright +44 (0) 20 7280 5000

Citi (financial adviser to Severn Trent)

Simon Lindsay +44 (0) 20 7986 4000

Barclays (financial adviser and corporate broker to Severn Trent)

Alisdair Gayne +44 (0) 20 7623 2323

Morgan Stanley (financial adviser and corporate broker to Severn Trent)

Paul Baker +44 (0) 20 7677 8000

Tulchan (financial communications adviser to Severn Trent)

Andrew Grant +44 (0) 20 7353 4200

Martha Walsh

Bases and Sources

The relevant bases of calculation and sources of information are provided below in the order in which the relevant information first appears in this announcement and by reference to the relevant statement.

1. Reference to total shareholder return is derived from data provided by Thomson Reuters Datastream which assumes reinvestment of dividends.

2. Reference to the share price premium of 20.5% is based on the Proposal of 2,200 pence per Severn Trent ordinary share, which assumed that the 45.51p per share final dividend already announced in respect of the year ended 31 March 2013 is not paid to shareholders, and the share price of 1,825p on 13 May 2013, the day before the announcement of LongRiver's interest in Severn Trent.

3. Reference to RCV as at 31 March 2013 is to reported RCV as shown on Ofwat's website. Reference to estimated RCV as at 31 March 2015 is calculated by applying year end RPI forecast from Experian of 3.4% for 13/14 and 3.3% for 14/15. For RCV values see:

www.ofwat.gov.uk/regulating/prs_web_rcvupdates.

Rothschild, which is authorised by the Prudential Regulation Authority and regulated in the UK by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively for Severn Trent and no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Severn Trent for providing the protections afforded to clients of Rothschild nor for providing advice in relation to the subject matter of this announcement or any other matters referred to in this announcement.

Citigroup Global Markets Limited, which is authorised by the Prudential Regulation Authority and regulated by the Prudential Regulation Authority and the Financial Conduct Authority, is acting exclusively for Severn Trent and for no-one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Severn Trent for providing the protections afforded to its clients or for providing advice in connection with the matters set out in this announcement.

Barclays Bank PLC, acting through its Investment Bank ("Barclays"), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Severn Trent and no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Severn Trent for providing the protections afforded to its clients or for providing advice in relation to the subject matter of this announcement or in relation to the contents of this announcement or any transaction or any other matters referred to herein.

Morgan Stanley & Co. International plc, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as financial adviser to Severn Trent and for no one else in relation to the matters described in this announcement. In connection with such matters, Morgan Stanley & Co. International plc, its affiliates and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to anyone other than Severn Trent for providing the protections afforded to their clients or for providing advice in connection with the matters described in this announcement or any matter referred to herein.

Notes:

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.