Severn Trent (SVT) Investor Update (Q&A) summary

Regulatory and business strategy updates

• Green power strategy continues with solar investments and opportunistic growth, with potential hedging adjustments due to regulatory changes.

• Ongoing engagement with Ofwat on energy cost treatment, C-MeX metric asymmetry, and risk/reward balance.

• Commitment to maintaining investment-grade credit ratings (BBB+/Baa1) amid evolving cost of debt and regulatory adjustments.

• Sector-wide enforcement by Ofwat focuses on future compliance, with constructive engagement and a commitment to exceed requirements.

• Ofwat assessed the PR24 business plan as Outstanding in its Draft Determination, pending final approval.

Financial and operational performance

• Record 28% real RCV growth in AMP8, with Hafren Dyfrdwy delivering 32% growth; enhancement spend is more CapEx-heavy due to regulatory cuts.

• Strong balance sheet supported by a £1bn equity raise, resulting in the lowest sector gearing and readiness for record investment.

• Financeability levers and cost of equity changes are under review, with representations planned to Ofwat for further adjustments.

• Revenue guidance and detailed forecasts will be updated after the final determination; current guidance is limited to year five.

• Dividend policy will consider regulatory outperformance, non-regulated business, and recent equity injections, aligning with Ofwat's methodology.

Investment and cost efficiency

• Totex increased by £4.3bn compared to PR19, with Ofwat indicating potential for further increases.

• Over 90% of enhancement spend approved, with a c.10% real terms increase in base costs from PR19.

• Enhanced cost sharing means only 40% of out/underperformance is borne by the company.

• Retail costs increased by £140m (24%) in real terms compared to PR19.

• Out-turned as the second most efficient company on Waste, Bioresources, and Retail cost models.