April 7, 2009 – Wall Street Journal – LONDON (Dow Jones)–Severn Trent said Tuesday that it has submitted its final business plan to Ofwat for the period 2010 to 2015. The final plan sets out proposals for delivering water and wastewater services, including details of revenues, costs, investment, maintenance, proposed price limits and improvements to services over the five-year period, it said.

The director Tony Ballance, said “the outcomes of our final business plan include; lowest possible bills – average household bills will rise by 4% in real terms (an annual average of 0.8%) by 2015.

Challenging efficiency targets delivering a reduction in controllable operating costs of GBP63 million per year by 2014/15 and over GBP200 million of capital efficiencies over AMP5, he said.

“The appointment of the 11 principal AMP5 contractors, announced on March 2, is an important part of our plans to deliver these capital efficiencies”, he said.

An AMP5 capital investment programme of similar levels to AMP4 at around GBP2.6bn (net of efficiencies, grants and contributions at 2007/08 prices).

This investment will deliver improved services, such as stronger network resilience and reductions in sewer flooding; provide environmental improvements through improving sewage treatment; and ensure that environmental and drinking water quality improvements achieved in the past two decades are maintained, he said.

An assumed cost of capital of 5.0% real, post tax, consistent with maintaining an appropriate credit rating to allow the company to raise the funds it requires to finance future investment at a reasonable rate.

The component parts of the assumed cost of capital are; real post tax cost of equity of 7.7% (AMP4 7.7%), real post tax cost of debt of 3.3% (AMP4 3.0%) and 60% gearing (AMP4 55%), he said.


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