LONDON – Severn Trent (LON:) Water has received approval from the economic regulator Ofwat for a £14.9 billion investment plan for the years 2025 to 2030, marking a significant increase from previous allocations. This regulatory settlement, part of the PR24 Final Determination, represents a £3.1 billion rise from the Draft Determination and nearly doubles the amount approved in the last review period (PR19).

The company anticipates a 45% real growth in Regulatory Capital Value (RCV) over the Asset Management Plan (AMP (OTC:)) period, which is expected to take the closing RCV to approximately £17.2 billion, considering 2022/23 prices. In nominal terms, this equates to a 64% growth, resulting in a closing RCV of £21.6 billion.

Severn Trent (NS:)’s investment aims to address customer priorities, including halving spills by 2030, reducing river pollution, cutting leakage by 16%, replacing around 1,400km of water mains, and supporting biodiversity by protecting 3% of England’s nature recovery network. Additionally, the company plans to invest in 70 waste treatment works to support regional growth and aims to achieve operational Net Zero by 2030.

The Ofwat determination also includes an update to the allowed cost of capital, which has increased by 31 basis points to 4.03%, factoring in a cost of debt at 3.15% and a cost of equity at 5.1%. Severn Trent Water will also receive a 30 basis points reward for achieving ‘Outstanding’ for its PR24 Business Plan.

Severn Trent will hold a presentation to provide initial analysis and respond to questions on Friday, 20 December 2024. The company has committed to a thorough review of the Final Determination and will offer a market update in early 2025, with further details to be shared at their Capital Markets Day on 5 March 2025.

The investment plan is set to maintain Severn Trent’s position as having the second lowest bill in England and includes a £575 million affordability package to assist customers with their bills. This information is based on a press release statement from Severn Trent.

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