Severn Trent has told investors it is confident the “vast majority” of its spending plans for 2025-2030 will be approved, after asking for a doubling in total expenditure.
The record £12.9 billion of spend will impact bills to the tune of a 37% increase, from £379 at the end of this asset management period (AMP7) to £518 at the end of AMP8.
Chief financial officer Helen Bowles explained the breakdown of spending planned in 2025-30, which the the plan outlined as £12.9 billion of investment.
“We feel really confident of securing the vast majority of that spend,” she said.
Within the headline figure, £7.9 billion is base Totex and modelled enhancements such as running costs of the business and growth.
She said the organisation is confident its base costs will be deemed efficient by Ofwat based on PR24 cost models. At PR19 the company got more base Totex than it asked for.
A further £5 billion will be enhancement spend, of that £4.1 billion is required to cover statutory obligations – the biggest component is £3 billion on the water industry national environment programme (WINEP) as set out by the Environment Agency.
The company’s chief executive, Liz Garfield, said the plan has investor backing and promised regulatory capital value growth (RCV) “beyond anything people might have been expecting” for PR24. The RCV of 31% in the upcoming asset management period (AMP8) compares to 10% this AMP.
Garfield said the plan delivers on customers’ feedback and will “push frontier performance” for the sector with “fair” bill rises.
She said 76% of customers accepted the plan with the average bill increase to £518 by 2030. This, Garfield explained will be achieved by the organisation “really challenging (itself) on AMP8 costs”.
“We want to demonstrate to Ofwat we are not only ready to deliver the plan, we’ve addressed all of their priorities. We’ve paved the way for a successful outcome, we believe.”
The chief executive said she was confident Severn Trent will deliver outperformance in AMP8 as it has in AMP7, and will have its outcome deliver incentive (ODI) “war chest” going into the new period.
The full plans will be published and submitted to Ofwat on Monday (2 October). Utility Week will be running live coverage as they are released, with snap analysis on the key talking points. Boomark this page for the latest updates.