Severn Trent Plc has today announced that Severn Trent Water has accepted the Final Determination for the period 2015-2020 published by Ofwat on 12 December 2014.

 The Board said the decision means its customers will continue to have the lowest combined average bills in the country until at least 2020. Severn Trent Water bills will fall in real terms over the next five years, by which time they will be around £60 below the industry average.

The water company also making provision to help four times as many customers who struggle to pay their bill over the next five years.

AMP6 will see Severn Trent’s largest ever five year investment programme, totalling £6.2 billion in real terms, which includes a capital investment programme of £3.3 billion.

Severn Trent said that although c. £30 million of investment on improving water quality was not included in Ofwat’s Final Determination, the Board had  nevertheless decided to keep it in the plan.

Severn Trent said it will fund the additional investment using savings achieved by operating its business more efficiently. The firm is also committed to significantly improving customer service performance through its suite of ODIs (Outcome Delivery Incentives) which include fixing 100% of visible leaks within 24 hours and reducing interruptions to supply by more than 50%.

 The Board said the next five years will also see a greater focus on reducing flooding, employing innovative solutions to improve river quality such as catchment management and a wide ranging community educational programme to promote water conservation and reduce sewer blockages.

The water company will also undertake one of its largest ever capital investment projects to improve the resilience of water supplies to one million customers in Birmingham.

Commenting on the decision to accept Ofwat’s determination, the company said:

“The price review has been a challenging process and the Final Determination contains stretching objectives and requires significant improvements in operating efficiencies. However, the Board believes it can meet the required operational and capital expenditure levels whilst delivering on its performance commitments. This belief is based on the process improvements made over the current regulatory period and plans already in place to deliver the efficiencies contained in the business plan for 2015-2020.”

 In order to deliver the plan and reflecting the lower cost of capital allowed by Ofwat, Severn Trent has reviewed its financing plan and dividend policy.

The Company intends to manage its existing debt portfolio and future debt issuance to increase the proportion of debt which is at floating rates. In addition, the Board has decided to move towards a net debt/RCV gearing ratio of around 62.5% which is in line with Ofwat’s notional assumption. As part of this move Severn Trent will commence a £100m share buy back programme.

Severn Trent also announced its dividend policy for the period 2015-2020 - the Board has decided to set the 2015/16 dividend at 80.66p, a reduction of 5% compared to the current year total dividend of 84.90p.  Policy will then be to grow the dividend annually at no less than RPI until March 2020. This replaces the current dividend policy of RPI+3% which runs until March 2015.

Liv Garfield, Chief Executive Severn Trent Plc, said:

“At Severn Trent we always seek to strike the right balance between the service customers receive, the bills they pay, and returns to investors and we believe our plan for the next five years achieves that balance, delivering better services, better value and a healthier environment. The price review has been a challenging process but has led to a great outcome for customers. “