Severn Trent Regulatory News (SVT)

Severn Trent outlines ambitious sustainability commitments for the future

Severn Trent Plc is today hosting a Capital Markets Day, focusing on our approach to sustainability and the benefits we can deliver both for the environment and for the wider stakeholders we serve.

We are making a number of ambitious long-term commitments that will enable us to support our purpose of taking care of one of life's essentials. These commitments are integral to the delivery of the customer outcomes agreed in our business plan for the next five years and also in securing a sustainable long-term future for the business we run. As part of our plan we have chosen to invest £1.2 billion in delivering our commitments.

We will:

· Deliver our Triple Carbon Pledge of Net Zero emissions, 100% energy from renewable sources and 100% electric fleet, all by 2030:

- committing to develop science based targets with real reductions in carbon across scope 1, 2 and 3 emissions1;

- achieving our 100% renewable energy target by 1 April 2020 with over 50% coming from self- generation and the balance purchased through REGO-backed renewable sources1;

- purchasing only electric cars from now, and only electric vans from 2023;

· Enhance the biodiversity of 5,000 hectares of land (1% of the national target2) by 2027;

· Work with around 9,000 farmers - 63% of the farmers in our whole region - to adapt working practices and adopt nature based solutions to reduce pollutants in 44 catchments;

· Reduce leakage by 15% by 2025 and by 50% by 2045;

· Extend our commitment to paying the living wage to anyone who works with Severn Trent in our supply chain, not just our direct employees;

· Annually supporting 195,000 customers who struggle to pay their bill, by 2025;

· Donate 1% of Severn Trent Water's profits (over £10 million) over the next five years into the Severn Trent Community Fund, investing in projects in our local communities, while;

· Continuing to have one of the lowest combined bills in England and Wales for our customers.

Our Capital Markets Day will explore our commitments in more detail and these are outlined on the following pages.

Liv Garfield, Chief Executive of Severn Trent, said:

"We firmly believe that businesses with a strong social purpose can deliver better and more sustainable outcomes for all stakeholders over the long term. To truly make a difference we need to look after nature and the precious resources it provides, we need the most talented and engaged minds helping us to drive performance and innovate, and we need customers who trust us to do the right thing for their communities. We're incredibly proud of the work we have done so far when it comes to sustainability and excited that our stakeholders support the approach we are taking for the future. By committing to invest £1.2 billion in the next five years we believe we can make a real difference to the environment and people we serve while delivering strong business outcomes at the same time."

Tony Juniper, Chair of Natural England, said of Severn Trent's commitment to biodiversity:

"This very significant contribution from Severn Trent toward the creation of a national Nature Recovery Network could not be more welcome. If we are to achieve our goal to be the first generation to leave nature in a better state than we found it then this is exactly the kind of leadership, vision and partnership working that we will need. We hope that other major companies will soon come forward with comparable ambition, leading over time to an historic turnaround in the fortunes of our wildlife and natural environment."

Further information

Materials from the day and the introduction hosted by Christine Hodgson (Chair Designate) and Liv Garfield (Chief Executive) will be available on our website (severntrent.com) later this morning. Videos from all other sessions will be available from Monday 9 March.

1See glossary for definition

2As set out in the Government's 25 year environment plan

An established track record

Over the past five years we have already made significant strides to becoming a more sustainable business that delivers great outcomes for a broad range of stakeholders. We have:

· Invested over £190 million in our green energy business to achieve our target of self-generating over 50% of our energy needs;

· Reduced our net carbon emissions by 40% since 2015, and by 57% since 2007;

· Invested £350 million in improving 1,600km of river quality - a third of the rivers in our region;

· Reduced leakage by 6% and waste water pollutions by around 20%;

· Supported over 50,000 customers each year who struggle to pay their bill;

· Educated over 700,000 customers about responsible water use;

· Established a Sustainable Finance Framework to match our commitments; and

· Been credited with the Fair Tax Mark for transparently paying the right amount of tax.

Making a step change in our approach

The business planning process for AMP7 created an important opportunity for us to align our view on what good business looks like with the views of our customers. The work we created together around societal purpose formed a key component of our PR19 submission and our ongoing approach, so much so that we have asked Ofwat to embed this within our licence to operate. 

Attendees of our Capital Markets Day today will hear the following:

Triple Carbon Pledge

We have been innovating and leading on carbon reduction for over 40 years, starting with anaerobic digestion of our sewage sludge. Our years of experience in this area have helped position us at the frontier of the sector when it comes to energy generation which, together with a focus on demand, have significantly reduced our carbon emissions as well as our operating costs. We recognised the need to go further and in May 2019 we announced our Triple Carbon Pledge, which we will achieve through:

· Net zero carbon by 2030

- Committing to real reductions in carbon across Scope 1, 2 and 3 emissions in accordance with the Paris Agreement1 and setting science based targets to be transparent on our progress.

- Insourcing our capital design team so that we build carbon impact into the way we design and build all future assets.

- Fully utilising our £5 million innovation test centre to explore new resource recovery technology and low energy treatment on a large scale.

· 100% electric vehicles by 20302

- All cars purchased going forward will be electric, and 100% of our car fleet will be electric by 2026.

- Increasing our number of electric vans, with only electric purchases from 2023.

- Working with vehicle suppliers to explore options for HGVs and tankers.

- Installing 300 charge points over 65 sites in the next 18 months.

· 100% renewable energy by 2030

- Will be achieved from 1 April 2020 with over 50% through self-generation, and the remainder purchased through REGO-backed renewable sources1, but with an ambition to do more.

- Continuing to increase self-generation, primarily through Bioresources and food waste AD.

- Entering into dedicated power purchase agreements to meet a proportion of our energy needs.

1 See glossary for definition.

2 Assumes suitable specialist vehicles such as tankers become available within that time window.

Restoring the natural habitat

By working to improve the natural habitat at each stage of the water cycle, we can improve the environment and the local areas our communities work and live in as well as substantially reduce the cost to our business. We will commit to the restoration of natural habitats by: 

· Enhancing the biodiversity of 5,000 hectares of land (1% of the national target) by 2027, with our Great Big Nature Boost

 - Using wildflower margins and beetle banks to reduce pesticide use, run-off and soil erosion.

 - Planting 1.3 million trees over the next 10 years to help reduce flooding and improve water quality.

· Halving the number of pollutions in our region over the next five years

 - Encouraging changes in behaviour through customer education, working with businesses to install fat traps, and prosecuting where necessary.

 - Investing in an in-house reactive tankering team in our waste business to prevent small incidents turning into serious pollutions.

· Improving the quality of a further third of the region's rivers, equating to 2,100km

 - Investing £350 million by 2025 to improve final effluent discharge through asset enhancement under the Water Framework Directive.

 - Exploring nature-based solutions to remove harmful nutrients, such as phosphates, in rivers.

 - Deploying wetlands to treat waste at our smaller sites, reducing costs and creating wildlife habitats.

· Improve river water quality in 44 of our most important catchment areas by engaging with c.9,000 farmers (63% of those in our region) to reduce pollutants from agriculture entering the watercourse.

Managing water scarcity

Water is a vital component of our supply chain and through our 25 year Water Resource Management Plan we know that meaningful reductions in leakage and consumption are needed to mitigate the impact of climate change and population growth. On a national scale, we must play our part in helping to balance the geographical supply and demand challenges we face and think creatively about how we build infrastructure that allows us to share resources. As part of our long-term strategy on water management, we will:

· Deliver a 15% reduction in leakage by 2025 and commit to a 50% reduction by 2045

 - Improving how we manage our own network and reducing customer-side leaks.

 - Finding and fixing leaks faster with new technology such as fibre optics and robotics.

 - Benefitting from the 40,000 sensors installed across our network over the last two years.

 - Leveraging the World Water Innovation Fund, bringing together companies from around the world to collectively tackle some of the biggest challenges facing our industry, starting with leakage.

· Reduce Per Capita Consumption (PCC1) by 3.5%, or 36 million litres a day, by 2025

 - Installing at least 500,000 meters by 2025 to reduce leakage and PCC, and provide valuable data.

 - Educating 500,000 schoolchildren over the next five years to use water wisely.

 - Helping our customers reduce consumption by providing home surveys and water-saving devices.

· Establishing the right infrastructure-based solution to balance water demand across the North and South of England, through detailed feasibility and partnership work, by 2025.

1 See glossary for definition.

Helping people thrive

As a business which provides an essential service to our region, we can (and do) make a real difference to the people we interact with every day, whether that’s customers, colleagues, or communities. Around 87% of our employees are also our customers and they live in our communities, making the connection to our business uniquely strong. This connection creates a highly motivated and engaged workforce who are inspired to do their best work and they expect us to do our best for those we serve. This shines through in our commitments to:

· Work with the sector to eradicate water poverty

- No combined water and waste bills to be greater than 5% of disposable income by 2030.

- Supporting 195,000 of our customers who struggle to pay each year, by 2025.

· Creating an inclusive work environment and caring for our colleagues

- Committing to the recommendations of the Parker review1 on BAME1 inclusivity.

- Extending our commitment to paying the living wage to anyone who works with Severn Trent in our supply chain, not just our direct employees.

- Continuing our approach to improving social mobility, having last year recruited 44% of new starters from social mobility cold spots.

- Investing £10 million in a new technical training academy, enhancing skills in the Midlands.

· Donating 1% of Severn Trent Water's profits (over £10 million) into a Community Fund over the next five years

- Awarding grants of up to £250,000 to support local projects through a customer-led panel.

Being a company you can trust

We understand that in order to earn trust you need to deliver on commitments, report your progress transparently and create a governance structure that enables good decision making. Our track record of doing the right thing, combined with our open culture, has supported the progress we have made to date and we will continue to improve, starting with:

· Transparent reporting in all of our publications, and this year publishing our first separate Sustainability report, reflecting TCFD1 and GRI1 guidelines, alongside our Annual Report.

· A third of every employee's bonus is linked to our performance across our sustainability commitments - from the Executive Committee to the front line.

· Embedding social purpose and sustainability in our decision making process across our organisation and reporting on it.

· Requesting our social purpose commitments be enshrined in our licence to operate with Ofwat.

Commitments in numbers

In our plan for the next five years we have committed to improving on a range of areas in consultation with our customers. These are the things they care about the most and are aligned with our sustainability ambitions. The following table gives an indication of where the £1.2 billion we are spending in the next five years will be delivering benefits.

Figures shown in average AMP7 prices.

1 See glossary for definition.

Glossary

AMP7: Asset Management Plan for the five year regulatory period starting 1 April 2020.

PCC: Per Capita Consumption (PCC) is the average amount of water used by each person that lives in a household property (litres per head per day).

Living Wage: The real living wage is an independent calculation of the cost of living, based on a basket of household goods and services.

Scope 1 emissions: All direct emissions from the activities of the business.

Scope 2 emissions: Indirect emissions from electricity purchased and used by the business.

Scope 3 emissions: All other indirect emissions from activities of the business, but occur from sources that we do not own or control.

Paris Agreement: The Paris Agreement is an agreement within the United Nations Framework Convention on Climate Change (UNFCCC), with a long-term goal to keep the increase in global average temperature to well below 2 °C above pre-industrial levels; and to pursue efforts to limit the increase to 1.5 °C, recognising that this would substantially reduce the risks and impacts of climate change.

REGO-backed renewable energy: Energy which is backed by Renewable Energy Guarantees of Origin (REGO). The REGO scheme is a government scheme, regulated by Ofgem which provides transparency to consumers about the proportion of electricity that suppliers source from renewable generation.

Parker Review: Independent review by Sir John Parker into the ethnic diversity of UK boards.

BAME: Black, Asian and Minority Ethnic.

TCFD: The Taskforce on Climate-related Financial Disclosures (TCFD) recommendations are designed to achieve consistent, decision-useful, forward-looking information on the material financial impacts of climate-related risks and opportunities, including those related to the global transition to a lower-carbon economy.

GRI: The GRI Sustainability Reporting Standards (GRI Standards) are the most widely adopted global standards for sustainability reporting.

Enquiries

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).