|[13 APR 99]SEVERN
TRENT WATER PRESS RELEASE
Severn Trent Proposes Reduced Bills
Trent's Strategic Business plan proposes:
- An initial one-off price cut of 5% in 2000 - £11 off customers' bills.
- Prices will then increase by 1 1/2% pa above inflation for the four years 2001-2005 to
finance an investment programme of £2.3bn.
- Efficiency savings of 3% pa of controllable operating costs and 7 1/2% off capital
- An average regulated return after tax of 5.7% pa.
Severn Trent Water, the wholly owned subsidiary of Severn Trent Plc which supplies
water and sewerage services to over 8 million people in the Midlands and parts of Wales,
today announced proposals for reductions in customer bills from 1 April 2000, together
with capital investment plans totalling £2.3 billion over the five years to 2005.
On Friday 9 April, Severn Trent submitted to OFWAT its plan for delivering further
improvements in services to customers and the environment. Severn Trent proposes to reduce
bills by an average of 5.0%; this will mean a reduction of £11 in the average household
bill. In the following four years there will be a small increase in bills at the rate of 1
1/2% pa above inflation.
Commenting on the plan, Vic Cocker, Group Chief Executive, said
"We believe everyone can benefit from this balancing of new investment spending
and price cuts. Customer bills will reduce by £11 next year but we've been able to plan
for improvements in our services and the environment. We will be investing a further £2.3
billion in our treatment plants, infrastructure and distrubution system - bringing the
total since privatisation to over £7 billion."
In broad outline these improvements will require work at 65 different water treatment
works, the rehabilitation of 1,900km of water main, the replacement of over 150,000 lead
communication pipes, improvements at nearly 400 sewage treatment works and the removal of
nearly 370 combined sewer overflows.
"This is the most extensive programme of investment the company has ever
undertaken," said Mr Cocker.
"Our plan is a stretching one - we have targeted 3% pa efficiency improvements in
our controllable costs and 7.5% reduction in capital investment costs based on current
"The planned regulatory return on our assets averages 5.7% over the five years,
which represents a fair return for our shareholders and a very good deal for our
customers, who will continue to benefit from the second lowest average bill for unmeasured
water and sewerage charges."
"We will be duscussing our plan with Ian Byatt, the Director General, Office of
Water Services, and we expect the final price determination to be announced by him in
1 OFWAT has announced its intention to provide summary
details of water companies' plans on the OFWAT website on Friday 16 April. In order to
clarify the details of its plans, Severn Trent Plc has decided to reveal the contents of
2 The Strategic Business Plan is Severn Trent Water's
formal response to OFWAT's proposals for the pricing regime in the water industry
published last October. It outlines the company's thinking on the funding of the industry
after 2000, and the company's plans to meet customers' and regulators' expectations for
the first five years of the next millennium.
OFWAT is due to make a draft determination on prices after
2000 in July, and a final decision is expected in November.
3 The investment programme of £2.3bn includes
approximately £3/4bn of environmental and water quality improvements. These formed part
of the £8bn national programme announced by Environment Minister, Michael Meacher, at the
beginning of March.
Vic Cocker, Group Chief Executive 0121 722 4176
Alan Costin, Group Finance Director 0121 722 4429