Severn Trent Plc · LSE:SVT
Severn Trent — Debt Investor Presentation (December 2011)
29 slides from Severn Trent's debt investor presentation, December 2011
Slide 1: Presentation to Bond Investors
Presentation to Bond Investors December 2011 Tony Wray, Chief Executive Mike McKeon, Finance Director
Slide 2: Agenda
Agenda • Overview and update • Overview of sector and Severn Trent • 2011/12 interim results • Funding • Sector developments • Ofwat consultations and White Paper • Water Trading • Private Drains and Sewers (PDaS) 2
Slide 3: Severn Trent profile
Severn Trent profile Focus on “water” – clean & waste water Severn Trent Water (STW) • A leading UK water utility • Proven management team & workforce / performance-driven culture • Significant operational improvements • Regulatory settlement up to 2014/15 agreed • Aim - to be the best water and was
Slide 4: Structure
Structure Group Market cap1 £3.6bn Enterprise value2 £7.4bn At 29 Nov 2011 1. Market cap based on closing price 29 Nov 2011 2. Market cap at 29 Nov 2011 + net debt at 30 Sept 2011 Turnover £1,711m PBIT* £519m Regulated (“STW”) Unregulated (“STS”) Turnover £1,390m Turnover £336m PBIT* £504m PBIT* £26
Slide 5: Severn Trent Water - Overview
Severn Trent Water - Overview Severn Trent Water is one of the largest Water and Sewerage Companies in England and Wales We cover an area of 21,000km2 We : • supply water for c.7m people, sewerage services to c. 8m people • supply 1.8bn litres water per day • treat 2.7bn litres waste water per day O
Slide 6: The UK water industry
The UK water industry • Water Companies privatised in 1989 – licences cannot be terminated until 2014 (i.e. 25 yrs after privatisation) and only then with 25 yrs notice • Investment led industry – capital investment is added to the RCV (Regulated Capital Value) • Economic returns allowed on RCV thro
Slide 7: Highlights
Highlights H1 H1 Change 2010/11 2011/12 % Group Turnover (£m) 867.9 886.0 2.1 Profit before interest and tax (PBIT1) (£m) 277.0 274.3 (1.0) Profit before tax (PBT2) (£m) 158.0 155.0 (1.9) Adjusted basic EPS3 (pence) 47.4 46.4 (2.1) Basic EPS (pence) 43.9 30.5 (30.5) Interim dividend per share (pence
Slide 8: Severn Trent Water turnover
Severn Trent Water turnover Severn Trent Water Turnover* H1 2011/12 £m £32.7m +4.7% 37.1 (5.1) 1 (1.1) 1.8 735.0 702.3 0.0 8 * Business segment turnover is stated gross (i.e. including inter segment trading),
Slide 9: Severn Trent Water PBIT
Severn Trent Water PBIT Severn Trent Water PBIT* 2011/12 £m 32.7 (1.6) (3.6) 1.2 (5.5) +0.1% (3.4) (13.8) (1.3) (4.5) 272.7 272.9 9 * Numbers shown before exceptional items
Slide 10: Cash flow
Cash flow Six months ended 30 September 2011 £m 475.6 (150.1) 325.5 (83.2) (35.5) (92.5) 2.1 (0.3) 116.1 (6.1) 110.0 10
Slide 11: Outlook
Outlook FY 2011/12 Severn Trent Water • Opex below the level of final determination • Bad debt to remain at 2.2% • Capex £450m-£470m range; IRE £120m-£130m (ex. PDaS) Severn Trent Services • H2 weighted Group • Interest charge broadly in line with prior year • Tax rate 26%-27% 11
Slide 12: Funding update
Funding update • Strong liquidity - £500 million undrawn 5-year RCF, renewed in October 2011 • Funding requirement of c. £1.0 billion in AMP5, refinancing c. £850 million • Stable credit ratings • Cost of debt fixed for remainder of AMP5 period ─ c. £100m benefit vs. final determination • Expected R
Slide 13: Group net debt and finance charges
Group net debt and finance charges Net debt* Finance charge £m £m 119.1 119.4 3,869 3,759 Index linked 1,104 1,135 89.4 91.2 Nominal 3,080 3,036 26.8 30.0 2.9 Cash 315 1.8 413 H1 2010/11 H1 2011/12 'Cash' interest 31 March 2011 30 Sept 2011 RPI rolled up Net pension (debit)/credit • 73% at fixed int
Slide 14: Debt maturity profile
Debt maturity profile Maturity profile of gross debt (£ millions) 700 600 500 400 300 200 100 0 2012 2017 2022 2027 2032 2037 2042 2047 2052 2057 2062 2067 Average maturity of around 15 years 14
Slide 15: Gearing
Gearing At 30 September 2011 31 March 30 September Net debt/RCV 2011 2011 57% Severn Trent Plc 54% 58% Severn Trent Water 55% 15
Slide 16: Credit ratings
Credit ratings 30 September 2011 Long-Term Severn Trent Water Severn Trent Plc Moody’s A3 Baa1 Standard & Poor’s BBB+ BBB- Short-Term Severn Trent Water Severn Trent Plc Moody’s P2 P2 Standard & Poor’s A2 A3 Moody’s – long term rating is stable Standard & Poor’s – long term rating is stable 16
Slide 17: Summary
Summary Delivering planned opex - good cost control Investment in efficiencies supports strength of balance sheet Prudent investment in our networks Clear funding requirement for AMP5 Stable credit ratings 17
Slide 18: Agenda
Agenda • Overview and update • Overview of sector and Severn Trent • 2011/12 interim results • Funding • Sector developments • Ofwat consultations and White Paper • Water Trading • Private Drains and Sewers (PDaS) 18
Slide 19: Ofwat consultations and White Paper
Ofwat consultations and White Paper Ofwat • Involving customers in price setting – Ofwat’s customer engagement policy statement (August 2011) • Regulatory Compliance – a proportionate and targeted approach (October 2011). • Future price limits Defra • White Paper 19
Slide 20: Water Trading
Water Trading The issue Abstraction levels Resource zones for water companies in England & Wales Incremental cost Average Incremental Social and environmental Cost, rounded up to next 20 (p/m3) Indication of abstraction across England and Wales, taking account of A study on potential benefits of ups
Slide 21: Water Trading
Water Trading The opportunity for Severn Trent Northumbrian • Our long term demand / United supply is broadly balanced Utilities Yorkshire • Opportunity to be the trading “hub” Severn Trent Anglian • Efficient operator - lowest bills in England and Wales Welsh Thames • Opportunity for further RCV We
Slide 22: Private Drains and Sewers (PDaS)
Private Drains and Sewers (PDaS) Overview Pre 1 October Post 1 October • Home owners are responsible for • All sewers transfer everything up to the main sewer, • All laterals and drains outside property including the connection boundaries transfer - BUT • Home owners are still responsible for the pr
Slide 23: Private Drains and Sewers (PDaS)
Private Drains and Sewers (PDaS) Current status • Successful handover on 1st October • To date in-bound call volumes lower than expectations – 4,000 jobs on transferred assets Cost YTD Guidance • Positive customer feedback* Exceptionals £2.5m £6m Opex £1m £12-15m Capex £1.5m £8-12m 23 * Comments: 1-
Slide 24: Summary
Summary Ongoing requirement for prudent investment in our networks Shaping the regulatory debate Water trading – an opportunity PDaS – a long term positive Right strategy for today and tomorrow 24
Slide 25: Contact details
Contact details John Crosse Key Publications Head of Investor Relations M: +44 (0) 7775 226260 Water Trading e:mail: john.crosse@severntrent.co.uk www.stwater.co.uk/watertrading Gerard Tyler Changing Course www.stwater.co.uk/changingcourse Group Treasurer M: +44 (0) 7775 226260 Response to David Gra
Slide 26: Disclaimers
Disclaimers For the purposes of the following disclaimers, references to this “presentation” shall be deemed to include references to this document, the presenters’ speeches, the question and answer session and any other related verbal or written communications. This presentation is confidential and
Slide 27: Disclaimers
Disclaimers This presentation contains certain “forward-looking statements” with respect to Severn Trent's financial condition, results of operations and business, and certain of Severn Trent’s plans and objectives with respect to these items. Forward-looking statements are sometimes, but not always
Slide 28: Severn Trent
SEVERN TRENT
Slide 29: Appendix - Simplified debt structure
Appendix - Simplified debt structure Severn Trent Plc c£50m EMTNs Regulatory ringfence c£600m EIB Small bank Severn Trent Severn Trent Other group loans and loans and Water Luxembourg companies c£250m project Limited Overseas finance finance Holdings SA leases c£3bn Severn Trent Severn Trent Severn
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