Severn Trent Plc · LSE:SVT
Severn Trent — Investor Presentation (December 2024)
22 slides from Severn Trent's investor presentation, Dec 20, 2024
Slide 1: PR24 Final Determination
PR24 Final Determination 20 December 2024
Slide 2: Disclaimers
DISCLAIMERS Cautionary statement regarding forward-looking statements This document contains statements that are, or may be deemed to be, 'forward-looking All written or verbal forward-looking statements, made in this document or made statements' with respect to Severn Trent's financial condition, r
Slide 3: PR24 Final Determination
PR24 FINAL DETERMINATION 1 Final Determination Update 2 Our AMP8 Plan 3 Organisational Readiness 3
Slide 4: Final Determination Update
FINAL DETERMINATION UPDATE 4
Slide 5: What's new in the Final Determination?
WHAT’S NEW IN THE FINAL DETERMINATION? Sector WACC Real RCV now Improved ODI up 31bps to growing by 45%, targets, in 4.03%, with fully equity particular ESF increases in cost funded for AMP8 and GHGs of equity and FD Revenue debt FD AMP8 totex higher Severn Trent bill of £14.9bn, than in DD remains
Slide 6: Significant support from Ofwat across our five focus areas
SIGNIFICANT SUPPORT FROM OFWAT ACROSS OUR FIVE FOCUS AREAS 1 Totex Received £14.9bn of Totex, 95% of total ask 2 ODI package 15 out of 22 performance commitments improved 3 Cash flow c. £380m additional cash flows from energy and rates 4 Returns Cost of equity increased 30bps to 5.1% 5 Cost of Debt
Slide 7: £3.1bn additional totex approved
£3.1BN ADDITIONAL TOTEX APPROVED 95% of total AMP8 funding request approved Totex increased to £14.9bn Uplift in totex enables further step change in investment Base cost increase, £1.2bn £14.9bn Enhancement spend reinstated including additional allowances on energy and £0.1bn business rates, Biores
Slide 8: Evolution of ODI framework
EVOLUTION OF ODI FRAMEWORK More balanced ODI package Key measures adjusted following DD Evolution of ODIs External Sewer Flooding 2030 target improved by more than 50% 10 targets improved Greenhouse Gas Emissions target uplifted to correct inconsistencies 5 deadbands added Pollutions targets updated
Slide 9: Improved returns
IMPROVED RETURNS Higher base return and a track record of outperforming Improved WACC, supported by 30bps reward… …with a track record of outperforming the base return Average 5.1% 3.15% 30bps AMP6 5.6% 2.9% Cost of Equity Cost of Debt Outstanding + 30bps + 31bps reward Average AMP7 3.9% 4.2% Averag
Slide 10: Our AMP8 Plan
OUR AMP8 PLAN 10
Slide 11: Delivering record RCV growth
DELIVERING RECORD RCV GROWTH Unprecedented investment driving 45% real RCV growth in AMP8 AMP8 closing RCV of £17.2bn in 2022/23 prices Certainty of growth = £21.6bn in nominal prices¹ AMP8 plan fully equity funded 45% AMP8 transition spend earning a return from 1 April 2025 7.6% AMP8 Real 40% Visib
Slide 12: Investing to deliver for customers
INVESTING TO DELIVER FOR CUSTOMERS Broad-ranging investment programme delivers the outcomes our customers care about most Other £ 0.2 bn Scale investment into water Protecting 3% of England’s Population Raw Water treatment and biosolids to £ 0.3 bn nature recovery network Growth Bioresources address
Slide 13: ODI measures are well understood
ODI MEASURES ARE WELL UNDERSTOOD Known measure and met target at least once during AMP7 Known measure and not met target during AMP7 Existing measures New measures Customer contacts Compliance risk External sewer Unplanned outage about water Capital carbon - index flooding Storm overflows quality Be
Slide 14: Significant financial protection in place
SIGNIFICANT FINANCIAL PROTECTION IN PLACE Totex Financing Enhanced sharing rates, reducing risk for Cost of new debt allowance true up for investors movements in iBoxx, reducing interest ✓ 50:50 base costs rate exposure ✓ 60:40 Enhancement spend ✓ 90:10 Business rates 30bps reverse halo introduced t
Slide 15: Organisational Readiness
ORGANISATIONAL READINESS 15
Slide 16: Deliverability driving higher growth
DELIVERABILITY DRIVING HIGHER GROWTH Uniquely placed to deliver investment, driving guaranteed growth Unique delivery enablers already in place… … and already stepped up our run rate Embedded in-house design team unlocks digital 1,800 AMP8 average capex In-house skills and automation capabilities 1,
Slide 17: Supporting customers
SUPPORTING CUSTOMERS We remain committed to keeping bills affordable, while delivering record investment Maintaining affordable bills throughout AMP8… … and supporting those who can’t pay We begin and end AMP8 with the second lowest bill in England, reflecting our continued focus on efficiency £575m
Slide 18: Operational outperformance
OPERATIONAL OUTPERFORMANCE Opportunity to outperform on measures customers care about most Most ambitious improvement programme, with Sector leaders on ODIs since their inception Storm Overflows 1,200 interventions this year Net ODIs earned in AMP6 and AMP7¹ (£m) 600 500 Leakage Six consecutive year
Slide 19: Financing outperformance
FINANCING OUTPERFORMANCE Allowance changes give further confidence in financing outperformance Outperformed in high and low inflation rate environments, Entering AMP8 with one of the lowest costs of debt in the with agile treasury strategy sector, expect to outperform embedded allowance from Day 1 1
Slide 20: Summary: our initial view
SUMMARY: OUR INITIAL VIEW We have seen positive movement in all key areas from Draft to Final 1 Final Determination Update Determination We will deliver record RCV growth by investing in the areas that matter 2 Our AMP8 Plan most to our customers 3 Organisational Readiness We are ready to deliver an
Slide 21: Capital Markets Day
Capital Markets Day Join us at the Severn Trent Academy 5 March 2025 21
Slide 22: Q&A
Q&A James Jesic Liv Garfield Helen Miles Shane Anderson Director of Capital Chief Executive Chief Financial Director of Strategy Delivery and Officer Officer and Regulation Commercial