Severn Trent Plc · LSE:SVT
Severn Trent — Corporate Update (July 2024)
16 slides from Severn Trent's corporate update, Jul 23, 2024
Slide 1: PR24 Draft Determination
PR24 Draft Determination 23 July 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: Overview
OVERVIEW Outstanding Draft Efficient base status Determination costs in line with delivers financial provides good Plan, with greater upside and basis for totex protection increased engagement with in place certainty Ofwat Need for all 13 Record level of enhancement real RCV growth cases agreed; of
Slide 4: An Outstanding Plan
AN OUTSTANDING PLAN Outstanding rating provides significant protection versus a standard plan Financial reward of £93 Minimum WACC Minimum level of base 50-50 cost sharing on million is set costs agreed base expenditure Ofwat's asks for Outstanding Achieved 4* for an unprecedented four Achieve 4*
Slide 5: Delivering for Stakeholders
DELIVERING FOR STAKEHOLDERS Outstanding plan that addresses the issues our stakeholders care about Customers Environment Investors • 28% real RCV growth based on totex • 16% reduction in leakage, on track to hit Scale investment in transforming the approved so far government target of 50% reduction
Slide 6: Record RCV Growth
RECORD RCV GROWTH Unprecedented levels of investment driving 28% real RCV growth in AMP8 Closing AMP8 RCV1 of £15.6bn in Draft Determination Unlocking growth to 2050 and beyond vs £16.2bn in Business Plan 28% The need for all 13 enhancement cases established Generating £2.5bn Return on RCV² Unlocks
Slide 7: Totex Overview
TOTEX OVERVIEW Significant totex increase approved, and Ofwat has Greater cost protection on both base and indicated potential for further movement enhancement costs Totex increased by £4.3bn compared to PR19… New mechanisms protect economic value but create timing gap in AMP8 0.7 Base costs 13.9 1.
Slide 8: Base and Enhancement Costs
BASE AND ENHANCEMENT COSTS Base costs are in line with our submitted plan Need for all 13 enhancement cases established £0.3bn £0.9bn 4X PR19 £0.7bn >90% £0.2bn c. 10% real approved >50% terms increase £7.9bn £7.2bn £6.0bn approved £4.6bn from PR19 Enhancement costs Reduction in modelled Reduction i
Slide 9: Financing and Returns
FINANCING AND RETURNS Strong Balance Sheet ready for record investment Minimum return higher, but still upside potential Successful £1 billion equity raise supporting AMP8 investment Outstanding status provides additional 30bps and minimum return Lowest gearing in the sector, after accounting for fu
Slide 10: An Evolving ODI Regime
AN EVOLVING ODI REGIME Ofwat are committed to “powerful incentives to deliver better performance” Ofwat’s ambitions Committed to tackling totemic sector issues “Common performance commitments with greater comparability” Incentive rate Track Record “Achievable yet stretching targets” 11% reduction 2.
Slide 11: Affordable Bills
AFFORDABLE BILLS As we enter multi-AMP growth period we remain focused on keeping bills affordable for all 2030 bill second lowest in England and Wales £575m Supporting 1 in 6 affordability customers by 1.2% of disposable income today, 1.2% in 2030 support package 2030 – enough to (including extra h
Slide 12: Hafren Dyfrdwy
HAFREN DYFRDWY Delivering additional value through our Welsh business Standard plan, + 5bps on Over 90% enhancement Cost of Equity expenditure accepted Biggest plan ever, Opportunity for ODI delivering 32% real RCV incentives to reflect the growth size of the company 12
Slide 13: Summary
SUMMARY Outstanding Plan provides platform for strong AMP8 and beyond ✓ Good outcome on quality and ambition assessment Key elements as expected ✓ Increase in WACC from early view ✓ Efficient base costs and need for investment established ✓ 28% real RCV growth based on Totex approved so far Growth l
Slide 14: Q&A Tuesday 23rd July
Tuesday 23rd July Q&A 14:00 and 22:00 BST Join Zoom Meeting by clicking here Meeting ID: 813 1206 0140 Passcode: Wonderful! Helen Miles Liv Garfield Shane Anderson Chief Financial Chief Executive Director of Strategy Officer Officer and Regulation
Slide 15: Appendix
APPENDIX
Slide 16: PR24 Enhancement Cases
PR24 ENHANCEMENT CASES Need for all 13 enhancement cases established Water resilience Net Zero Water WINEP Waste WINEP Bioresources WINEP SEMD – physical security SEMD – alternative supplies Urban flooding Meeting future water needs Reducing lead Cyber security Raw water deterioration Reservoir safe