Statement re Impact of Flooding July 2007

SEVERN TRENT PLC

STATEMENT REGARDING IMPACT OF FLOODING JULY 2007

UNPRECEDENTED NATURE OF INCIDENT AND OF RESPONSE

Incident and response

The people of Gloucestershire, Worcestershire and surrounding areas have, as
has been widely reported, suffered unprecedented levels of flooding as the
rivers Avon and Severn burst their banks over a wide area on the night of
Saturday 21 and Sunday 22 July 2007.

At around 3am on Sunday 22 July, Severn Trent's Mythe Water Treatment Works
(Mythe) near Tewkesbury was inundated as waters overcame the existing flood
defences. A controlled shut down of the works was carried out by Severn Trent
Water personnel, who then evacuated the site.

As a direct consequence of this forced closure of Mythe, around 140,000
households (approximately 340,000 customers) in Gloucestershire and
Worcestershire have endured over a week without running water.

Severn Trent Water immediately put into action its emergency plans and from day
one of this major incident has mobilised significant resources to provide
alternative sources of water for our customers and to restore their water
supplies. Severn Trent Water integrated its incident response teams with those
of Gold Command led by the Chief Constable of Gloucestershire, which in turn
reported to COBRA, the government emergency committee in London.

The size and scale of both this incident and the response are, we believe,
unprecedented in the recent history of the UK Water Industry.

During the 17 days since the start of this incident Severn Trent Water has:

  * Purchased and made available over 50 million litres of bottled water,
   
  * Deployed over 1,300 water bowsers and over 100 tankers to refill these
    bowsers up to 3 times per day,
   
  * Deployed over 2,000 personnel from Severn Trent Water and its contractors
    to address the requirements of this incident,
   
  * Purchased and installed additional emergency flood protection systems at
    Mythe,
   
  * Installed at Mythe emergency generators and other equipment as part of an
    enhanced resilience plan,
   
  * Re-established water supplies 8 days after regaining access to Mythe, and
   
  * Re-established potable water status to all affected areas on Tuesday 7
    August 2007, 14 days after regaining access to Mythe.
   
Business Impact

During the course of this unprecedented incident, the immediate priority for
Severn Trent Water has been the provision of alternative sources of water for
affected customers and the restitution of normal water and sewerage services.

There has been a substantial gross economic cost to these activities which we
are only now beginning to quantify.

We have yet to establish the impact of this incident on our regulatory and
other performance measures.

Short Term:

At the current time, we estimate that the gross cost of dealing with the
incident is likely to be in the range of £25 million to £35 million, however we
expect that this will be partially offset by insurance recoveries of between £
10 million and £20 million. The estimated gross costs and recoveries may be
subject to material revision over the coming weeks as the full extent of these
become clearer and we will update the market accordingly. We believe we will
have a fuller understanding of these costs by the time we provide our interim
pre close update in early October 2007.

The Guaranteed Standards of Service (GSS) payments do not apply in these
circumstances due to the exceptional nature of the weather and consequent scale
and speed of the flooding to unprecedented levels.

However, the affected communities have suffered significantly during this
period and Severn Trent Water recognises the important long term role it has to
play in the community. The Board of Severn Trent Water has therefore decided to
make available up to £3.5 million to support the affected communities in
recovering from this incident. We will be working with the local authorities to
determine how to make best use of this money. We believe that a contribution
such as this will be of long term benefit for all in the community. This
contribution is included in the estimated costs described above.

Longer Term:

Two inquiries to address flood risk management and the flooding incidents in
the UK during 2007 have already been announced. Severn Trent Water will fully
cooperate with these inquiries as well as carrying out its own review to learn
any appropriate lessons. It is not possible today to anticipate what longer
term changes, costs or investments may be required in Severn Trent Water's
operations or networks that may arise from these inquiry conclusions. We will
work closely with Ofwat and other regulatory agencies to ensure a proper
response to these conclusions.

Conference call

A conference call for investors and analysts will be chaired by Tony Wray,
Managing Director of Severn Trent Water, at 9am on Wednesday 8 August 2007.
Call details are as follows:

Telephone number: [phone]

PIN code: 769508#

This call will be recorded and available immediately after the live call has
concluded for playback for 30 days and can be accessed as follows:

Telephone number: [phone]

Conference reference: 182649#

Enquiries

Tony Wray                Severn Trent Plc   0121 722 4202                
                                                                         
Managing Director, Severn Trent Water                                    
                                                                         
Mike McKeon              Severn Trent Plc   0121 722 4319                
                                                                         
Group Finance Director                                                   
                                                                         
Peter Gavan              Severn Trent Plc   0121 722 4310                
                                                                         
Director of External Affairs                                             
                                                                         
Jonathan Davies          Severn Trent Plc   0121 722 4295                
                                                                         
Head of Investor Relations                                               
                                                                         
David Trenchard          Tulchan            020 7353 4200                
                                                                         
Peter Hewer              Communications                                  

- 3 -