Severn Trent (SVT) Investor Update (Q&A) summary

Regulatory and Strategic Updates

• Ongoing engagement with Ofwat to clarify energy cost treatment, ODI metrics, and regulatory adjustments, with further feedback expected by the half-year results.

• Commitment to maintaining investment-grade credit ratings (BBB+/Baa1), with financial modeling ongoing as Ofwat updates cost of debt assumptions.

• Sector-wide enforcement case by Ofwat focuses on future compliance regarding spills, with constructive dialogue and data provision underway.

• Enhancement TOTEX cuts are being challenged with additional evidence, especially for novel projects and areas lacking benchmarking.

• Active participation in sector discussions with government and Ofwat, emphasizing the need for an investable sector and improved standards.

Financial Resilience and Investment

• Equity injection of £1 billion pre-funds AMP8, supporting dividend policy and financial resilience, resulting in the lowest sector gearing and readiness for record investment.

• RCV growth expected at 28%, with accelerated investment included in AMP8 calculations and midnight adjustments; Hafren Dyfrdwy delivers 32% real RCV growth.

• All 13 enhancement cases agreed, unlocking multi-AMP investment and further growth potential to 2050.

• Totex increased by £4.3bn compared to PR19, with Ofwat indicating potential for further increases and over 90% of enhancement spend approved.

• CapEx as a share of TOTEX is expected to be higher in the draft determination versus the business plan.

ESG and Operational Performance

• Achieved a record fifth consecutive year of 4-star status in the Environment Agency's 2023 Environmental Performance Assessment, on track for a sixth, and advancing the most ambitious storm overflow improvement plan in the sector.

• Green power strategy remains central to net zero ambitions, with ongoing investments in solar and opportunistic growth.

• Bespoke ODI for capital carbon incentivizes innovative, low-carbon investment delivery, leveraging in-house design capabilities.

• Customer support initiatives include a £25 million fund for payment matching and debt management, monitored by Ofwat, and a £575m affordability support package.

• 16% leakage reduction achieved, on track for 50% government target early, with £2.6bn WINEP investment to improve river health and £250m for Net Zero by 2030.