Severn Trent PLC SVT considering Ofwat proposal to increase ODI cap (0373G)

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RNS Number : 0373G

Severn Trent PLC

01 November 2018

LEI: 213800RPBXRETY4A4C59

1 November 2018

Severn Trent Plc considering Ofwat's proposal to increase Customer ODI cap

Earlier this year Severn Trent Plc applied to lift the cap on its waste water customer ODIs(1) , in line with the methodology prescribed by Ofwat in PR14. This application followed a survey of over 4,000 customers, of whom 72% supported the principle of uncapping, reflecting the strong benefits that a culture of incentivisation continues to deliver for our customers and the environment.

We note two items from Ofwat's publication 'Draft determination of in-period ODIs for 2018', released this morning:

   1.   An adjustment to our 2017/18 supply interruptions customer ODI performance, resulting in a net outperformance payment across all customer ODIs for 2017/18 of GBP72 million(2) in 2012/13 prices(4) pre-tax. 

2. A proposal to increase the AMP6(3) cap on our waste water customer ODIs from 2.0% to 2.6% of Regulated Equity, which would increase the potential AMP6 incentives by c. GBP56 million in 2012/13 prices(4) pre-tax. Ofwat's proposal is to also reset performance level targets for internal and external sewer flooding and pollutions to the level achieved in 2017/18, and reduce the incentive rate for external sewer flooding by 85%, for the remaining two years of the AMP.

We will now assess the proposal outlined in the consultation document and respond to Ofwat in due course. We will update the market following this consultation process.

(1) Customer Outcome Delivery Incentives

(2) Previously announced as GBP80 million in 2017/18 full year results

(3) Asset Management Period 6, from 2015 to 2020

(4) Outperformance payments and penalties are recognised in revenue with a two year lag, inflated from 2012/13 prices using RPI

 
 
 
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 Head of Investor Relations 
 
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 Investor Relations Manager 
 
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Cautionary statement regarding forward-looking statements

This document contains statements that are, or may be deemed to be, 'forward-looking statements' with respect to Severn Trent's financial condition, results of operations and business and certain of Severn Trent's plans and objectives with respect to these items.

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Forward-looking statements are not guarantees of future performance and no assurances can be given that the forward-looking statements in this document will be realised. There are a number of factors, many of which are beyond Severn Trent's control that could cause actual results, performance and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to: the Principal Risks disclosed in our latest Annual Report and Accounts (which have not been updated since the date of its publication); changes in the economies and markets in which the group operates; changes in the regulatory and competition frameworks in which the group operates; the impact of legal or other proceedings against or which affect the group; and changes in interest and exchange rates.

All written or verbal forward-looking statements, made in this document or made subsequently, which are attributable to Severn Trent or any other member of the group or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. This document speaks as at the date of publication. Save as required by applicable laws and regulations, Severn Trent does not intend to update any forward-looking statements and does not undertake any obligation to do so. Past performance of securities of Severn Trent Plc cannot be relied upon as a guide to the future performance of securities of Severn Trent Plc.

Nothing in this document should be regarded as a profits forecast.

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November 01, 2018 07:04 ET (11:04 GMT)