TOP NEWS: Severn Trent hails start to year as Ofwat sets investments

(Alliance News) - Severn Trent PLC on Thursday left its outlook unchanged after a "strong start" ...

Alliance News 15 July, 2021 | 8:42AM
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(Alliance News) - Severn Trent PLC on Thursday left its outlook unchanged after a "strong start" to its financial year, with the water company adding it is on track to invest up to GBP650 million in green projects.

In addition, Ofwat, the UK water industry watchdog, said the sector will commit GBP2.7 billion toward "building back greener".

Coventry-based Severn Trent hailed a "strong start to the year operationally" and affirmed annual guidance. It targets GBP1.78 billion to GBP1.81 billion of revenue in its Regulated Water & Waste Water business. The unit includes its wholesale water and retail services arm. Revenue there came in at GBP1.62 billion in the year that ended March 31, so Severn Trent expects growth of as much as 12% in the current financial year.

"We have made a strong start to the year operationally, focused on delivering a great service for our customers, and are confident of achieving at least GBP40 million positive net outperformance on customer outcome delivery incentives," Severn Trent said.

"On our capital schemes, we are on track to invest GBP550-GBP650 million this year, including our Green Recovery projects."

Severn Trent plans to release interim results on November 23.

In addition, UK water regulator Ofwat unveiled plans for sector-wide investment in green schemes.

"The water sector will invest GBP2.7 billion to deliver lasting environmental improvements for current and future generations," it said.

Some of this investment will come from listed firms. Severn Trent and United Utilities Group PLC, both FTSE 100 members, are among those Ofwat named. Among the other firms named is South West Water, owned by FTSE 250-constituent Pennon Group PLC.

Alongside South Staffs Water, South West Water and Thames Water, Severn and United will invest an extra GBP793 million between them on top of their existing PR19 packages. This will go towards "the green economic recovery", Ofwat said.

PR19 is the most recent Ofwat price review and outlines the level of investment water companies must make to deliver services to customers.

"These companies, along with seven others in England, are also bringing forward GBP1.9 billion worth of investment in additional statutory environment schemes into the 2020-25 period," Ofwat added.

"The final decision to give the green light on the additional investment will allow water companies to take extra action on the most pressing environmental issues."

Ofwat added that Severn Trent will invest GBP169 million to improve water quality in 500 kilometres of rivers, equal to the distance between London and Carlisle, in the north east of England.

Alongside Pennon's South West Water, Severn Trent and United Utilities will invest GBP158 million in a bid to reduce harm from storm overflows. They also will trial creating bathing rivers.

Ofwat added: "In addition, United Utilities and South West Water will deliver a range of nature-based solutions in partnership with local stakeholders. Severn Trent Water will work closely with local authorities to reduce flooding - developing natural flood management and green urban landscape solutions which will prevent rainwater entering the system in the first place."

Severn Trent shares were 0.7% higher at 2,695.00 pence each in London on Thursday morning. United Utilities was 0.1% higher at 1,039.00p. Pennon's stock was up 1.1% at 1,231.76p.

By Eric Cunha; ericcunha@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
United Utilities Group PLC 1,038.00 GBX -2.12
Severn Trent PLC 2,785.00 GBX -2.31 -
Pennon Group PLC 1,220.00 GBX -2.01 -

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