Severn Trent (LON:SVT) executives said the water utility is seeking to unlock additional investment in asset health through regulatory reopeners, while emphasizing that its current financing plans do not require additional equity before 2030.
Speaking on his first annual results call as chief executive, James Jesic said the company’s approach to the reopener process reflects its existing funding for areas including cyber, PFAS and growth, as well as its preparations for future investment needs. Severn Trent has announced about GBP 600 million of additional investment proposals through the process.
“The re-opener process includes considerations around asset health, cyber, PFAS, and growth,” Jesic said. “A lot of those we have already got covered through our business planning process.” He said the company is focused on using the asset health element to support longer-term plans, including transition spending toward the next regulatory period.
Asset health proposals anchor reopener submission
Shane Anderson, director of strategy and regulation, said the “real prize” from the reopener is unlocking investment in asset health, an area he said stakeholders including Jon Cunliffe, the government’s white paper and the National Audit Office have highlighted.
Anderson said Severn Trent’s scale gives it “a lot for us to go at,” citing the company’s large water network, water treatment works, distribution service reservoirs, sewage network and treatment works. Specific reopener proposals include:
- GBP 221 million to renew 2% of Severn Trent’s 479 distribution service reservoirs.
- GBP 175 million to renew 172 kilometers of the company’s 93,000 kilometers of sewers.
- AI-enabled inspections of just under 10,000 kilometers of sewers to help define future renewal rates.
- GBP 25 million to renew 11% of boreholes.
- Just over GBP 50 million for growth-related work across eight sewage treatment catchments.
On funding, Jesic reiterated that Severn Trent raised equity ahead of AMP8 and said that raise was intended to support the company through 2030. “As it stands, we are not raising any further equity for this AMP period at all,” he said. He added that outperformance, including about GBP 500 million of ODI benefits since 2021 and capital efficiency efforts, gives the company “real choices.”
ODI performance supports upgraded guidance
Management highlighted strong outcome delivery incentive performance, with Jesic saying 78% of metrics were green and that Severn Trent delivered GBP 73 million of ODI outperformance. The company also set guidance of at least GBP 50 million in nominal ODI outperformance for next year.
Steph Cawley, director of customer operations, said the company had focused on leakage, pollution and spills. She said Severn Trent reduced pollutions by one-third, reduced spills by 41% and improved leakage by 8% year over year. She also pointed to gains in D-MEx and biodiversity, and said the company now has 600,000 smart meters in the ground.
Asked about upgraded fiscal 2028 earnings per share guidance, CFO Helen Miles said the drivers included stronger ODI delivery, a stronger exit from the year, operating costs at the lower end of guidance and confidence in efficiency programs. Later in the call, Miles said management is confident in delivering earnings guidance of at least GBP 2.50, adding that the company uses cautious inflation assumptions.
Severn Trent also committed to GBP 150 million of operating cost efficiencies, in addition to previously announced capital efficiencies. Miles said AI, a new billing system, retail cost improvements and reduced cost of failure are among the factors supporting the target.
Customer service and affordability remain focus areas
Jesic acknowledged that Severn Trent has not performed well enough on C-MEx, the customer experience measure, after an analyst referenced a penalty in that area. He said most customers receive reliable service without needing to contact the company, but added that he has been emphasizing greater customer centricity across the organization.
Jude Burditt, director of customer solutions, said implementation of the Kraken customer platform replaced an aging system with a modern CRM platform that includes embedded AI. She said the company is now focused on using Kraken to improve customer journeys such as metering and house moves.
Cawley said operational improvements are also underway through a campaign called “One Call Is All It Takes,” focused on response times, follow-on work and keeping customers informed. She said response times for flooding have already improved by 80%, though “we’ve still got more to do.”
On affordability, Jesic said Severn Trent is conscious of bill impacts during a broader cost-of-living challenge. Burditt said the company has invested GBP 127 million this year to support 330,000 customers and is committed to spending GBP 575 million across the AMP, supporting about one in six families in its region.
Regulatory and political backdrop
Jesic said Severn Trent maintains constructive relationships with regulators and MPs across parties. Asked about the Cunliffe review and the government’s white paper, he said the direction of travel points toward a single regulator and a sector that remains investable while delivering for society. He said the company awaits a transition plan.
In response to questions about political commentary around greater public control, Jesic said politics can be “really noisy” and that the company remains focused on delivering for customers, the environment and shareholders. He said the idea of well-run companies serving the public good aligns with Severn Trent’s values.
On ongoing Ofwat and Environment Agency investigations, Jesic said Severn Trent is continuing discussions with both bodies and does not have a timetable for outcomes.
Water resources and AI-enabled efficiency
Executives also discussed water resources, with Jesic saying Severn Trent is commissioning a new water treatment works in Derby that will provide an additional 89 million liters of water per day at peak. Anderson said the company expects about a quarter of a million new houses every five years and will need to reduce groundwater abstractions under its Environmental Destination program, replacing about 20% of water sources.
Anderson said three large water resource schemes are proceeding through the RAPID process rather than the reopener route, including projects with the Canal & River Trust, the Mining Remediation Authority and one in South Yorkshire.
Company leaders also cited several AI applications supporting efficiency. Cawley said additional sensors and StormHarvester help predict and prevent waste network issues. Bob, identified on the call through the operator line, cited AI-based weather prediction to use cheaper water sources and machine learning at more than 200 sewage pumping station installations. Paul Baxter, head of water networks, said AI is being used for route selection on cross-country pipelines, cutting design work from months to hours.
About Severn Trent (LON:SVT)
As one of Britain's largest water companies, we supply fresh, clean drinking water to over nine million people across our region - around two billion litres every day. Once used, we collect, clean, and treat the water before safely returning it to the environment. We are one of only three listed water stocks in the UK, offering a valuable combination of reliable earnings, long-term asset growth, and inflation-linked dividends. The UK's regulatory model provides a high degree of certainty over five-year periods.
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