Severn Trent moves to next phase of improvements
- Severn Trent plc announces Severn Trent Water can meet tough Ofwat requirements
- Customers to receive lowest average bills over 2010-15 period
- Further service improvements and efficiency in business plan for next five years
Severn Trent Water has advised Ofwat that it can meet the requirements of the regulator’s Final Determination, setting out investment levels and prices for the next five years from 2010-15.
The company’s customers will benefit from new investment totalling £2.5 billion – an average of £800 per property (and more than two and a half times the current average annual household bill of £305). The money will be used to maintain and improve water and sewerage services in areas which customers have told us are their priorities. Customers will also have the lowest average water and sewerage bills in the UK over the five-year period.
Tony Wray, Chief Executive of Severn Trent, said: “Our plans will ensure that we can offer customers the lowest average water and sewerage bills across the whole of England and Wales, while still giving shareholders a sustainable return and improving the efficiency of our operations.
“Ofwat’s Final Determination represents a tough outcome. By continuing our programme of process and efficiency improvements, we believe we can meet our obligations for the next five years, while also delivering the service improvements our customers have told us they value.”
Severn Trent’s business plan for 2010-15 allows the company to deliver:
- Lowest possible bills – average household bills will fall by 4% (in real terms) by 2015
- Challenging efficiency targets to keep bill increases to a minimum
- Improved services, such as stronger network resilience and reductions in sewer flooding
- Environmental improvements through improving sewage treatment
- Investment in assets to ensure that environmental and drinking water quality improvements achieved in the past two decades are maintained
- Sustainable improvements to improve the water environment, develop sustainable drainage options, and minimise our carbon footprint
Tony Wray said: “Over the next five years, we aim to ensure that our customers continue to receive a high-quality, cost-effective service through investment in our people, processes and networks: we will continue to offer high standards and great people delivering the service, but now combined with the lowest average charges available in England and Wales.”
To finance its plan, the Board of Severn Trent has decided it requires a one-off reduction in the company’s dividend to shareholders of around 10% to take effect at the end of the first year of the period: the company will then seek to achieve growth in the dividend from that new base as performance improves.
“Our financing plan will give shareholders a sustainable and growing return, whilst allowing Severn Trent to maintain an appropriate level of dividend cover,” Tony added.
The Board’s decision will not affect the current dividend policy which runs to the end of the current financial year. Severn Trent plc will announce its preliminary full-year results for 2009/10 on 28 May 2010.