On Tuesday the company announced that it will prioritise investment in anaerobic digestion (AD) and solar generation during AMP6, as it seeks to meet half of its electricity needs from its own renewable sources.
The company plans for AD to make up more than half (55 per cent) of its energy generating portfolio by the end of the decade. It is also considering developing solar farms to help contribute 15 per cent of its total renewable energy generation by 2020.
Severn Trent said that increasing its own renewable energy capacity will provide a long-term hedge and a buffer against volatile market prices.
Severn Trent chief executive Liv Garfield also said the company is “well positioned” to make the investment which will contribute to savings on its operational expenditure.
The company has to make a total of £372 million of efficiency savings as set out in its final determination by Ofwat, but it has already planned for £287 million of efficiency savings.
This includes £100 million of savings that are “locked in” because the company has renegotiated supplier contracts. The number of suppliers from 1,490 in October 2013 to 1,415 by the start of this year. The company also intends to scale this back by a further 25 per cent.
Alongside this, Severn Trent will also aim to achieve its savings by batching projects together and utilising the economies of scale. Rather than running 4,500 smaller projects as it did during AMP5, it plans to run 120 large batches of projects in AMP6 to ensure better prices.
The management restructuring of Severn Trent, which was confirmed in November and has seen a reduction of 500 managerial roles, will also save the company £100 million during AMP6. The majority (80 per cent) of these savings will come from the merger between the wholesale water and waste arms of the business.
The company also announced last month that it will slash its dividend to 80.66 pence, a reduction of 5 per cent compared to the current year total dividend of 84.90 pence. This will grow annually at no less than RPI until March 2020.