Statement re Resolution of Fines

Severn Trent Plc today announces that, notwithstanding reservations about the enforcement process, Severn Trent Water has decided not to appeal the fines of £35.8 million imposed by Ofwat for deliberately providing false information to Ofwat in the period 2005-06, and for delivering poor service to its customers in the same period. It has also concluded discussions with Ofwat concerning the resolution of the Ofwat interim report of March 2006. As a result, Severn Trent Water has agreed to provide targeted financial support to its low-income customers who are in most need of financial support in the current difficult economic climate by making payments totalling £5m to the Severn Trent Charitable Trust Fund. This is likely to be paid £2m in each of the two years 2008-09 and 2009-10 and £1m in 2010-11. Tony Wray, Chief Executive of Severn Trent plc, said: "This final step now draws a line under the legacy issues stemming from a previous management regime. As agreed with our Regulator, Ofwat, we can now focus entirely on our continuing journey to put Severn Trent Water back into the positive position our customers, regulators, shareholders and employees deserve." For further information: Andrew Marsh Public Affairs Manager 0121 722 4121 Venetia Cooper Investor Relations Manager 0121 722 4523 Notes: The Severn Trent Charitable Trust Fund The Charitable Trust is an independent grant making trust which was established in 1997. It is a registered charity with the aim of helping customers who have a clear intent to be "good payers", but are having some temporary difficulty in paying their bill. Grants can be given to individuals towards water charges, other household charges and costs, and to organisations for the funding of debt counselling/money advice for householders falling into the individual category. The average grant is £300-£400 for individuals. Grants are not paid to customers who have no desire or perceived ability to become "good payers". People unable to meet the cost of water charges and who live in the Severn Trent Area can apply for help. 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 caused 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 2005/06. This fine was confirmed by Ofwat on 2 July 2008. 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. On 1 July 2008 it was fined £2m by the Central Criminal Court and ordered to pay £220,000 costs.

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