Severn Trent has welcomed Ofwat's announcement this morning that it has received regulatory endorsement to invest £565 million (2017/18 prices) in an ambitious Green Recovery programme to support the UK's green economic bounceback and create 2,500 new jobs in the Midlands.

The water company will now be working through the detail of Ofwat's response to its plans. Once finalised, the Green Recovery will enable Severn Trent to lead the way in a number of projects, many of which will be a first for the UK, all of which will involve additional investment and the creation of new jobs.

The plans represents a significant increase in expenditure over the 2021-25 period; approximately a 15% uplift on the company’s PR19 final determination wholesale cost allowance for AMP7.

The company has also provided Ofwat with evidence of headroom within its supply chain to ensure it has the capacity available to deliver the schemes.

The projects will benefit both local communities and the environment, and will be delivered alongside the Company's existing plans and investment for the region.

The projects will:

• Increase water supplies with enough water to supply a city the size of Derby, using low carbon technology;
• Encourage wild swimming by trialling the creation of two bathing rivers in stretches of the River Leam and the River Teme;
• Accelerate environmental commitments by improving 500 kilometres of river five years earlier than planned; allowing communities and wildlife to benefit sooner;
• Create a scale trial using a nature-based approach to reduce the risk of flooding whilst creating a green environment which will significantly benefit the town of Mansfield;
• Help customers to save water by introducing over 150,000 smart meters; and
• Remove old customer-owned lead pipes in up to 26,000 homes in two trial areas and using innovative techniques to find and replace them.

Ofwat’s draft determination provides Severn Trent with a total allowance of £564.627 million to deliver an extensive suite of proposals for the green recovery – the funding is spread across the following areas:

Accelerating environmental improvements - £168.872 million, to improve the quality of 500 kilometres of river by upgrading sewage treatment works, treating and reducing spills from storm overflows, and installing river quality monitoring. These proposals include £150 million to bring forward 35 wastewater treatment works process upgrades for phosphate removal, £5.874 million for upgrades to the Warwick wastewater treatment works and £8.4 million for river monitoring, low cost storm overflow interventions and overflow treatment trials. This includes the costs for 220 stage 1 storm overflow assessment framework (SOAF ) investigations (at a unit cost of £3188), 120 standard SOAF investigations for stages 2-4 (at a unit cost of £9564) and 30 complexSOAF investigations (at a unit cost of £91,590).

Building sustainable flood resilient communities - £75.675 million - to trial the use of blue-green infrastructure to deliver an urban catchment-scale flood resilience programme to deliver the equivalent of up to 60% (58,000m3) of the anticipated future network storage required in Mansfield by 2050 and a step change in the management of surface water. Ofwat’s expectation is that Severn Trent Water secures 11% third party funding upfront. The company is also expected to secure adoption and maintenance for agreed asset types.

Creating bathing rivers - £78.484 million - to help to eliminate harm from 25 storm overflows by reducing spills into the area during the bathing season and creating two inland bathing water trials via two large-scale pilots to deliver bathing-quality water in the Rivers Avon and Leam in Warwickshire, and River Teme in Shropshire. Ofwat proposes to make an allowance for £78.484 million for Severn Trent Water to focus a trial at Ludlow and Leamington Spa, and also to address all storm water overflows and storm tank spills proposed across the wider region. Two potential bathing water locations could be delivered through this trial, on the River Teme (upstream and downstream of Ludlow) and on the River Leam in Leamington Spa.

The trial scope will address all 25 storm overflow and storm tanks identified on the Rivers Teme, Avon and Leam (£69.537 million), and three wastewater treatment disinfection upgrades (£6.948 million) for Itchen Bank and Frankton on the River Leam, and Ludlow on the River Teme;

Decarbonising water resources - £139.841 million - to create new low carbon water resources to help improve drought resilience and water supplies in a low-carbon, reduced-chemical way, through a combination of supply- and demand-side solutions;

Smart metering - £20.120 million - to install 157,000 smart meters to improve water efficiency and reduce leakage. The meters for AMI, advanced meter infrastructure technology, will enable near real time data reporting across Coventry and areas of Warwickshire, that can be monitored remotely on a frequent basis. This includes replacement of 91,000 existing meters and 66,319 new meter installations;

Taking care of supply pipes - £74.626 million - to repair/replace 26,000 supply pipe across two trial areas to remove lead and reduce leakage;

Hampton Loade water treatment works improvements - £7.009 million - to improve water quality and reduce carbon emissions via a ceramic membrane solution for the Hampton Loade scheme in South Staffs Water's region. 

Liv Garfield, Severn Trent Chief Executive, said:

"We're really pleased by Ofwat's endorsement of our ambitious Green Recovery plans. Whilst we still need to go through the finer details of the announcement, we're delighted that Ofwat shares our enthusiasm for this impressive range of proposals, which we believe will benefit all our customers.

This investment into our region will see us lead the way by delivering a number of UK firsts including new, innovative trials to reduce the risk of flooding, increased water supplies and transformed stretches of river. What's more, we will also be creating 2,500 jobs in the Midlands at a time when increasing employment, and getting people back into work, is vital for our region.”

We'll be accelerating our capital spend to deliver these impressive plans and to achieve our existing commitments earlier.”

Whilst Severn Trent expects no material changes to today's draft determination, Ofwat is now entering a consultation period until 9 June and plans to issue its final decision in July 2021.