TIDMSVT
RNS Number : 3141D
Severn Trent PLC
28 January 2015
28 January 2015
Severn Trent Plc - acceptance of final determination for Severn
Trent Water and new dividend policy
Severn Trent Plc today announces that Severn Trent Water has
accepted the Final Determination for the period 2015-2020 published
by Ofwat on 12 December 2014.
This means that our customers will continue to have the lowest
combined average bills in the land until at least 2020. Severn
Trent Water bills will fall in real terms over the next five years,
by which time they will be around GBP60 below the industry average.
Next year average bills will fall to GBP329, from GBP333. We are
proud that Severn Trent customers have already had six consecutive
years of the lowest average combined bills and best value in
Britain. We are also making provision to help four times as many
customers who struggle to pay their bill over the next five
years.
We are committed to our largest five year investment programme
ever, totaling GBP6.2 billion* in real terms, the majority of which
will help to support the economy in the Midlands. This includes a
capital investment programme of GBP3.3 billion* to improve service
and quality for customers, which will help grow our RCV(1)
(Regulatory Capital Value) to c. GBP10 billion by 2020. Although c.
GBP30 million of investment on improving water quality was not
included in the Final Determination, we have nevertheless decided
to keep it in our plan. We will fund this additional investment
using savings achieved by operating our business more efficiently.
We are also committed to significantly improving customer service
performance through our suite of ODIs (Outcome Delivery
Incentives). These include fixing 100% of visible leaks within 24
hours and reducing interruptions to supply by more than 50%.
The next five years will also see a greater focus on reducing
flooding, employing innovative solutions to improve river quality
such as catchment management and a wide ranging community
educational programme to promote water conservation and reduce
sewer blockages. We will also undertake one of our largest ever
capital investment projects to improve the resilience of water
supplies to our one million customers in Birmingham.
The price review has been a challenging process and the Final
Determination contains stretching objectives and requires
significant improvements in operating efficiencies. However, the
Board believes it can meet the required operational and capital
expenditure levels whilst delivering on its performance
commitments. This belief is based on the process improvements made
over the current regulatory period and plans already in place to
deliver the efficiencies contained in the business plan for
2015-2020.
In order to deliver our plan and reflecting the lower cost of
capital allowed by Ofwat, Severn Trent has reviewed its financing
plan and dividend policy.
Going forward, the Company intends to manage its existing debt
portfolio and future debt issuance to increase the proportion of
debt which is at floating rates. In addition, the Board has decided
to move towards a net debt/RCV gearing ratio of around 62.5% which
is in line with Ofwat's notional assumption. As part of this move
Severn Trent will commence a GBP100 million share buy back
programme.
Severn Trent is also announcing today its dividend policy for
the period 2015-2020. The Board has decided to set the 2015/16
dividend at 80.66p, a reduction of 5% compared to the current year
total dividend of 84.90p. Our policy will then be to grow the
dividend annually at no less than RPI until March 2020. This
replaces the current dividend policy of RPI+3% which runs until
March 2015.
The Board believes that this financing plan and new dividend
policy are commensurate with a sustainable investment grade credit
rating.
* 2012/13 prices
1. Nominal, assumes year end 2.0% RPI for 14/15 and an average
of 3.3% year end RPI for 2015-2020
Liv Garfield, Chief Executive Severn Trent Plc, said:
"At Severn Trent we always seek to strike the right balance
between the service customers receive, the bills they pay, and
returns to investors and we believe our plan for the next five
years achieves that balance, delivering better services, better
value and a healthier environment. The price review has been a
challenging process but has led to a great outcome for customers.
We were pleased that our business plan achieved a high approval
rating of 88% from customers.
We know there is more we need to do to improve our processes and
raise our standards, and I'm looking forward to working with the
great people in Severn Trent and building on improvements made over
the current regulatory period, as we continue to deliver for our
customers and communities, shareholders and the environment."
There will be a conference call to discuss this announcement at
10:00 GMT today, Wednesday 28 January 2015. This can be accessed
via the Severn Trent website (www.severntrent.com) or by
dialling:
UK: freephone 0800 279 4977
USA: national freephone: 1877 280 2342
Conference Code: 5603989
Severn Trent Plc will publish its usual trading update for the
period 1October 2014 to 12 February 2015 on 13 February. The
company will also be holding a capital markets day on 17 March to
provide more detail on its business plan for the period
2015-2020.
Enquiries:
0207 353 4200 (on the
Liv Garfield Severn Trent Plc day)
Chief Executive 02477 715000
0207 353 4200 (on the
Mike McKeon Severn Trent Plc day)
Finance Director 02477 715000
0207 353 4200 (on the
Rob Salmon Severn Trent Plc day)
Head of Communications 02477 715000
0207 353 4200 (on the
John Crosse Severn Trent Plc day)
Head of Investor Relations 02477 715000
Katharine Wynne /
Martha Walsh Tulchan Communications 0207 353 4200
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' or
'estimates' 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 Annual Report as at May 2013
(which have not been updated since); 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. Subject to compliance with applicable laws and
regulations, Severn Trent does not intend to update these
forward-looking statements and does not undertake any obligation to
do so,
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).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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