OFWAT Publishes Draft Determination

Ofwat publishes Draft Determination                      

Severn Trent Water has today received Ofwat's Draft Determination for the
period 2010 to 2015 ("AMP5").

Tony Wray, Chief Executive, said: "The Draft Determination is a complex
document and there is a lot of detail to consider. We will be carefully and
thoroughly reviewing all of its content and conclusions before responding to
Ofwat in September 2009. This is the next step in our process and formal
representations in preparation for the Ofwat Final Determination in November
2009."

The Draft Determination responds to the Final Business Plans submitted by all
water companies in April 2009. Our plan includes key service and environmental
improvements, informed by customer priorities and extensive `willingness to
pay' research, while maintaining the drive for lowest bills in the water
industry. It was submitted as a balanced, holistic and robustly justified
business plan for the five-year period. An overview of the Severn Trent Water
Final Business Plan is available on the Severn Trent Water website (
www.stwater.co.uk/fbp).

The publication of the Draft Determination is an important step in the Price
Review process, which will culminate in final proposals being published by
Ofwat in November 2009 and new price limits taking effect in April 2010 (for
the 2010 to 2015 period).

The Ofwat Draft Determination proposes the following for Severn Trent Water:

  * A proposed AMP5 capital investment programme of £2.2 billion (net of
    efficiencies, grants and contributions at 2007/08 prices).
   
  * A proposed cost of capital of 4.5% real, post tax. The component parts of
    the assumed cost of capital are; real post tax cost of equity of 7.1% (AMP4
    7.7%), real post tax cost of debt of 2.6% (AMP4 3.0%) and 57.5% gearing
    (AMP4 55%).
   
  * A proposed fall in average household bills of 8% in real terms (annual
    average of 1.5%) by 2015.
   
Enquiries:

Jonathan Davies

Investor Relations
Severn Trent Plc
0121 722 4295

Andrew Marsh

Public Affairs Manager

Severn Trent Plc

0121 722 4555

Mal Patel or Peter Hewer
Tulchan Communications
0207 353 4200