Severn Trent trading in line ahead of new regulatory investment period

(Sharecast News) - Severn Trent said in an update on Wednesday that its financial performance remained on track, meeting expectations, as it anticipated delivering a net reward of at least £50m in customer outcome delivery incentives (ODIs). The FTSE 100 water and wastewater utility said that in the period to 18 July, it had effectively managed its net energy exposure through a natural economic energy hedge.

Currently, the company had locked in 45% of its net energy exposure for the 2024-2025 period at significantly lower rates compared to the prior year, protecting it against energy price volatility.

The firm's efficient management of its total expenditure programme had meanwhile been aided by its in-house engineering capabilities, advance procurement strategy, and direct relationships with a broad supply chain, the board explained.

As a result, Severn Trent's investment programme was progressing swiftly, with capital expenditure projected to range between £850m and £1bn in the current year.

The acceleration in investment was in preparation for the AMP8 regulatory period, which the company said was expected to be one of the most significant investment periods in the history of the privatised water sector.

Severn Trent's regulatory gearing, a measure of financial leverage, stood at 60% at the most recent financial year end, which the board said positioned it favourably for the increased investment in AMP8.

In terms of operational performance, Severn Trent said it had a strong start to the year, with reservoir levels currently at 77%, surpassing the levels recorded at the same time last year by more than 10%.

"We're pleased to have made a good start to the year, as we continue to focus on delivering the operational, environmental and financial performance our stakeholders expect of us," said chief executive officer Liv Garfield.

"We recognise that there is more we can do and we are committed to going further, faster, to deliver the best possible outcomes for our customers and the environment.

"The business is well-placed to deliver the progress needed with a highly engaged workforce, sustained operational leadership and a strong balance sheet, supporting future investment."

Reporting by Josh White for Sharecast.com.