Severn Trent Water is aiming to increase its own renewable energy generation to meet 50% of its energy needs by the end of AMP6, according to the preliminary announcement of its annual results for the year to 31 March 2015.

In March the water company announced a £190 million investment in renewable energy to take self generation from an equivalent 28% of Severn Trent Water's gross energy consumption to around 50% by 2020. According to the results, Severn Trent is already making good progress - the firm was trending towards 30% as an exit rate position for 2014/15 and is now the water industry leader in renewable energy generation.

This year will also see the commissioning and construction of its first solar arrays this year, while its wind turbines at Derby are now turning with the firm on track to produce 25 GWh p.a. from wind by March 2016. Severn Trent’s food waste anaerobic digestion plant at Coleshill is ahead of plan, with 14 GWh planned generation in 2015/16 and its next site is also well on track.

£300m of £372m AMP6  target efficiencies already locked in

With a new organisational structure, fewer management layers and new management team in place the company said that it was well positioned for AMP6.  The recent re-organisation included a reduction of 500 roles.  As a result it now has £300 million of £372 million target efficiencies already locked in –  the organisational changes will deliver £100 million of savings in AMP6 and  in March the firm outlined an additional £100 million of supply chain efficiencies.  Alongside the results, Severn Trent has also announced a further £100 million of efficiencies, which include a new single supplier contract on waste water and additional contracts delivering further capital efficiencies.

The next five years will see Severn Trent’s  largest ever five year expenditure programme, totalling £6.2 billion, which includes its largest ever capital investment programme of £3.3 billion. The firm’s Regulatory Capital Value is expected to grow to c. £9.6 billion by 20201.

Non-regulated businesses re-focussed on core activities

The group has also re-focused its non-regulated business Severn Trent Services on core activities - operating water and waste water assets, retail and renewables - leading to the recent sale of the Water Purification business which was considered as non-core. Severn Trent has reorganised and brought together its non-regulated businesses - Operating Services US, Operating Services UK (including Severn Trent Water non-household retail), and renewable energy - into a new "Business Services" division. 

The Chief Executive's Review said that Severn Trent Water had delivered a good financial performance in 2014/15, with growth of 3.9% to £539 million in underlying PBIT year on year. Turnover was stronger than expected due to higher measured consumption, increasing 2.4%, to £1,581 million.

The firm also made good progress during the year on a number of Ofwat's key performance indicators (KPIs), including a 20% decline in internal sewer flooding incidents, pollution incidents down by 18%, a 4% reduction in greenhouse gas emissions and a 38% reduction in supply interruptions greater than 3 hours.

Water quality and sewer blockages a key focus

Water quality remains a key focus for Severn Trent which currently achieves 99.96% compliance – the firm is implementing a seven point improvement plan and prioritising £35 million of investment to water quality. Severn Trent said the investment will replace and refurbish water quality assets, as well as providing a greater degree of resilience in both its networks and its water treatment works.

 The firm will also continue to focus on reducing sewer blockages – although its performance improved by over 8% year on year, it remains above the challenging target agreed with Ofwat.

 From 2015/16 onwards the water company will be reporting on its performance against the 27 ODIs (Outcome Delivery Incentives) and 45 associated performance commitments and any associated rewards or penalties included in its AMP6 Business Plan.

Commenting on the results, Liv Garfield, Chief Executive Severn Trent Plc, said:

 "I am pleased to have closed out AMP5 with a good all round performance. Underlying group PBIT was up 3.2% year on year to £540.3 million. Our focus remains on the customer and with average bills falling year on year and the lowest average bills in Britain until at least 2020, our customers are receiving good value for money. We are pleased to have launched our "Big Difference Scheme", helping more customers who struggle to pay their bill over the next five years.”

 “Our performance over the last year has also demonstrated where we are strong and the areas we need to focus on to drive improvement. Water quality remains a key focus area for us. We have hit our target of a 10% reduction in leakage over AMP5 and improved our customer service performance, creating 100 new front line roles in the process.”

 “We've made some significant cultural and operational changes to get our business in the best possible shape for AMP6. As a result, we are facing the future with confidence, despite one of the toughest price settlements in our history.”