Statement re Serious Fraud Office

RNS - 1 JULY 2008 - POST-FINE

Severn Trent Plc announces that at the Central Criminal Court today Severn
Trent Water Ltd was fined £2 million and ordered to pay £220,000 costs after
pleading guilty to two offences relating to leakage data supplied to Ofwat in
2001 and 2002.

Commenting on the court case and related legacy issues listed below, Tony Wray,
Chief Executive of Severn Trent Plc, said:

"We are finally close to resolving these issues from the past and putting this
organisation back into the positive position our customers, regulators and
staff deserve.

"We deeply regret the mistakes of the previous regime for which we have
apologised to customers. There were indefensible shortcomings in Severn Trent's
previous management and control systems during the 2000 to 2004 era.

"On behalf of our customers and staff we deplore the breach of the essential
trust between Severn Trent and all our stakeholders. We are already repairing
that trust with the root and branch reorganisation of Severn Trent undertaken
since 2005.

"Almost four years of intensive management time and effort has been spent
sorting out these legacy issues - time better spent benefiting customers.

"No one who was responsible is with our organisation now and we have already
ensured that Severn Trent did not profit from these failures by crediting
customers' accounts and altering bills appropriately," concluded Mr. Wray.

Having taken legal advice, and considered the best interests of customers and
stakeholders generally, the Board of Severn Trent has decided not to take
action against the former management.

Mr. Wray said: "Severn Trent is now focused on our ambition - to achieve the
highest quality of customer service standards while offering our customers the
lowest prices".

Legacy Issues

1. In March 2006 Ofwat published an interim report concerning allegations of
false reporting made against Severn Trent Water in 2004. Ofwat concluded that
Severn Trent Water:

  * Had poor internal processes and controls which led to incorrect income data
    being submitted to Ofwat in 2004 and price limits being £8m a year too high
    for five years to 2010.
   
  * Provided data to Ofwat in 2002 which was deliberately miscalculated and
    which meant customers were overcharged by £2m in 2004.
   
  * Approached the collection and submission of data in a manner which causes
    Ofwat serious concerns.
   
Severn Trent Water has credited customers' accounts and altered future bills
appropriately to ensure the company has not profited in any way.

2. Following information volunteered by an internal Severn Trent Water
investigation in 2006, Ofwat proposed in April 2008 to fine Severn Trent Water
£35.8 million for deliberately providing false customer relations information
to the regulator and providing a poor service to customers in 2005 and earlier
years. A final decision on the fine is expected to be announced soon.

Without waiting for Ofwat's conclusion, Severn Trent Water is lowering
customers' bills by £10.6million, around £2.40 per household, to ensure the
company has not profited in any way.

 3. In April 2008, having carefully studied the details of the charges, and
    having taken legal advice, Severn Trent Plc announced that Severn Trent
    Water was pleading guilty to two offences relating to leakage data supplied
    to Ofwat in 2001 and 2002.
   
Following today's conclusion of the court case, discussions will commence with
Ofwat concerning the resolution of the interim report of March 2006 which may
result in further amends being made to customers.

For further information contact:

Peter Gavan

Director of External Affairs

Severn Trent

Andrew Marsh

Public Affairs Manager

Severn Trent

Telephone: [phone]