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

Regulatory process and engagement

• Ongoing engagement with Ofwat includes submitting business plans by late August, with further queries and discussions until the final determination in December.

• Ofwat will update its models with the latest cost, debt, and performance data, potentially impacting the final determination.

• The company is actively providing additional evidence for enhancement business cases, especially where Ofwat has requested more information.

• Ofwat assessed the PR24 business plan as Outstanding in its Draft Determination released on 11 July.

• Well positioned for constructive engagement with Ofwat over coming months.

Financial and capital structure highlights

• Record 28% real RCV growth in AMP8, up from 10% in AMP7, with AMP8 closing RCV projected at £15.6bn.

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

• Ofwat's draft determination assumes a notional equity raise and a 2% base dividend yield, while the company has already set a 4% yield.

• Cost of debt in the WACC will be updated to reflect recent increases in financing costs, with further adjustments expected in the final determination.

• Minimum WACC set, with a 30bps boost for Outstanding plans and further upside potential between draft and final determinations.

Investment, operational, and environmental performance

• All 13 enhancement cases agreed, unlocking multi-AMP investment and further growth potential to 2050.

• Over 90% of enhancement spend approved, with opportunity to increase further based on robust evidence.

• Totex increased by £4.3bn compared to PR19, with new mechanisms for energy and rates protection and enhanced cost sharing.

• Achieved a record fifth consecutive year of 4-star status in the Environment Agency's 2023 Environmental Performance Assessment and is on track for a sixth.

• Implementing the sector's most ambitious storm overflow improvement plan, targeting interventions on 900 storm overflows this year and aiming to halve spill rates by 2030.