Severn Trent Water submits Final Business Plan ...

Severn Trent Water submits Final Business Plan to Ofwat            

In common with the rest of the water industry, Severn Trent Water has today
submitted its final business plan to Ofwat for the period 2010 to 2015.

The final plan sets out proposals for delivering water and wastewater services,
including details of revenues, costs, investment, maintenance, proposed price
limits and improvements to services over the five-year period. It is a
stakeholder led plan that aligns to the company's 25 year Strategic Direction
Statement (www.stwater.co.uk/sds) and reflects the changing economic
environment since submission of the Draft Business Plan in August 2008.

Tony Ballance, Severn Trent's Director of Regulation and Competition, said: "We
believe our final business plan will deliver the highest standards for a price
that our customers consider to be good value, while maintaining investor
confidence.

The outcomes of our final business plan include:

  * Lowest possible bills - average household bills will rise by 4% in real
    terms (an annual average of 0.8%) by 2015.
   
  * Challenging efficiency targets delivering a reduction in controllable
    operating costs of £63 million per year by 2014/15 and over £200 million of
    capital efficiencies over AMP5. The appointment of the 11 principal AMP5
    contractors, announced on 2 March 2009, is an important part of our plans
    to deliver these capital efficiencies.
   
  * An AMP5 capital investment programme of similar levels to AMP4 at around £
    2.6 billion (net of efficiencies, grants and contributions at 2007/08
    prices). This investment will deliver improved services, such as stronger
    network resilience and reductions in sewer flooding; provide environmental
    improvements through improving sewage treatment; and ensure that
    environmental and drinking water quality improvements achieved in the past
    two decades are maintained.
   
  * An assumed cost of capital of 5.0% real, post tax, consistent with
    maintaining an appropriate credit rating to allow the company to raise the
    funds it requires to finance future investment at a reasonable rate. The
    component parts of the assumed cost of capital are; real post tax cost of
    equity of 7.7% (AMP4 7.7%), real post tax cost of debt of 3.3% (AMP4 3.0%)
    and 60% gearing (AMP4 55%). The company published an update to its paper
    "The World has turned: but which way?" on 24 March 2009 setting out its
    latest views on the components of the weighted average cost of capital
    (WACC). This paper is available on its website at www.severntrent.com.
   
An overview of the Final Business Plan has been published on the Severn Trent
Water website this morning (www.stwater.co.uk/fbp).

Enquiries:

Venetia Cooper
Investor Relations Manager
Severn Trent Plc
0121 722 4523

Andrew Marsh

Public Affairs Manager

Severn Trent Plc

0121 722 4555

Mal Patel or Peter Hewer
Tulchan Communications
0207 353 4200