Ofwat’s Final Determination for the period 20...

19 January 2010

                          Severn Trent Plc statement                           

           re: Ofwat's Final Determination for the period 2010-2015            

           "Severn Trent Water Limited accepts Final Determination"            

Severn Trent Water Limited, a wholly-owned subsidiary of Severn Trent Plc, has
examined in detail Ofwat's final set of proposals for the period 2010-2015 (the
"Final Determination") in the context of: 

  * delivering required outputs within the allowed operational and capital
    expenditure levels;
   
  * maintaining the water and sewerage networks and delivering service
    enhancements to customers within the targets set by the new Capital
    Incentive Scheme;
   
  * financing of the Final Determination given the allowed return (as measured
    by the weighted average cost of capital) including a sustainable and
    progressive return to shareholders.
   
The Final Determination contains stretching objectives, and includes
significant improvements in operating efficiencies. However, the Board of
Severn Trent Water Limited believes it can meet the requirements of the Final
Determination at the operational and capital expenditure levels, delivering the
relevant regulatory outputs. This confidence is based on the process
improvement and investment that Severn Trent Water Limited has carried out over
the last 3 years, and plans already in place to deliver the efficiencies
contained in its Final Business Plan.

However, given the impact of the reduction in Ofwat's allowed weighted average
cost of capital to 4.5% real, the Board of Severn Trent Plc believes that for
the period 2010-2015 an opening adjustment to the level of dividend payment
will be necessary in order to maintain an appropriate and sustainable level of
shareholder return.

Taking into account Ofwat's price reductions and updated RPI assumptions, the
gearing assumptions from Severn Trent Water's Final Business Plan, together
with improved levels of capital and operating efficiencies that have been
identified, the Board of Severn Trent Plc has decided to rebase the first year
dividend for the start of the AMP5 period to a level around 10% below the full
year 2009/10 dividend. The policy for subsequent years is for growth in the
dividend from that new base, as performance improves, to deliver both
progressive and sustainable returns to shareholders.

This does not affect the current Severn Trent Plc dividend policy, which runs
until the end of AMP4.

In the current economic climate, Severn Trent Plc is targeting a flexible and
sustainable balance sheet structure and believes that the planned investment
program for AMP5 and new dividend policy are commensurate with a strong
investment grade credit rating.

Tony Wray, Chief Executive of Severn Trent Plc, commented:

"The Final Determination represents a tough outcome. Through ongoing process
and efficiency improvements we believe we can meet our operational obligations
for the next 5 years, delivering the service level improvements customers have
told us they value

Through our focus on continuous improvement, our plans will ensure we will be
at the front of the pack for operating efficiency by the end of the AMP5 period
while customers will have the lowest average bills across the whole of England
and Wales.

Given the price reductions contained in the Final Determination, in order to
finance our plan it is necessary to re-base the dividend for the first year of
AMP5 with a one off reduction of around 10%. We will seek to achieve growth in
the dividend from that new base as performance improves. This will give
shareholders a sustainable and growing return, whilst allowing us to maintain
an appropriate level of dividend cover.

Over the next five years Severn Trent Water Limited is committed to ensuring
that customers continue to receive a high quality, cost-effective service,
through investment in our people, processes and networks, while ensuring that
shareholders receive an appropriate and sustainable return."

To note: the Final Determination as published by Ofwat on November 26 2009
contained the following key highlights:

- An AMP5 capital investment programme of £2.5 billion (post efficiency and CIS
at 2007/08 prices) compared to £2.6 billion in the Final Business Plan;

- Annual average operating expenditure of £497 million compared to £514 million
in the Final Business Plan;

- A 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%, real post tax cost
of debt of 2.6% and 57.5% gearing. This is compared to 5% in the Final Business
Plan;

- A fall in average household bills of 4% in real terms (annual average fall of
0.9%) by 2015, compared to an increase of 4% in the Final Business Plan;

- Seven Trent Water Limited will have the lowest average bills in England and
Wales.

Severn Trent Plc will announce its preliminary full year results for the
financial year ending 31 March 2010 on 28 May 2010.

Enquiries:

Tony Wray                  Severn Trent Plc          0207 353 4200 (on the day)
                                                                               
Chief Executive                                      0121 722 4938             
                                                                               
Mike McKeon                Severn Trent Plc          0207 353 4200 (on the day)
                                                                               
Finance Director                                     0121 722 4319             
                                                                               
Andrew Marsh               Severn Trent Plc          0207 353 4200 (on the day)
                                                                               
Media Relations                                      0121 722 4555             
                                                                               
John Crosse                Severn Trent Plc          0207 353 4200 (on the day)
                                                                               
Head of Investor Relations                           0121 722 4523             
                                                                               
Peter Hewer/Mal Patel      Tulchan Communications    0207 353 4200             

Conference Call

There will be a conference call at 09:00 today, Tuesday 19 January 2010, to
discuss this announcement. Access details are as follows:

Telephone number: 01452 568 051

Passcode: 51075559

The accompanying presentation slides are available for download on the Severn
Trent web site (www.severntrent.com). A recording of the conference call, along
with the presentation slides, will remain on the web site for subsequent
review.

Forward-Looking Statements:

This document 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, identified by their
use of a date in the future or such words as "anticipates", "aims", "due",
"could", "may", "should", "expects", "believes", "intends", "plans", "targets",
"goal" or "estimates". By their very nature forward-looking statements are
inherently unpredictable, speculative and involve risk and uncertainty because
they relate to events and depend on circumstances that will occur in the
future.

There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, changes in the
economies and markets in which the group operates; changes in the regulatory
and competition frameworks in which the group operates; changes in the markets
from which the group raises finance; the impact of legal or other proceedings
against or which affect the group; and changes in interest and exchange rates.

All written or verbal forward-looking statements, made in this document or made
subsequently, which are attributable to Severn Trent or any other member of the
group or persons acting on their behalf are expressly qualified in their
entirety by the factors referred to above. Severn Trent does not intend to
update these forward-looking statements.