Severn Trent has today announced its intention to conduct a non-pre-emptive placing through the issue of new ordinary shares, Retail Offer shares and Subscription Shares to raise approximately £250 million following Ofwat's decision to endorse an award to Severn Trent of £565 million (2017/18 prices) for its Green Recovery proposals..
The share placing is expected to represent up to 5% per cent. of the existing issued share capital of the company to raise approximately £250 million of gross proceeds.
The rationale for the placing and use of proceeds follows Ofwat’s endorsement on 17 May 2021 of all six proposals submitted by Severn Trent to enhance the natural environment whilst creating jobs in the Midlands as part of the Green Recovery.
Following the regulator’s review process, Ofwat has made an award to Severn Trent of £565 million (2017/18 prices).
The proceeds of the Placing, Retail Offer, and Subscription will be used to fund the six projects under the Green Recovery Award.
Collectively the projects support the wider national agenda on climate change and the need for greater water supply security. They will support long-term growth asset growth for Severn Trent through decarbonising the supply of water, accelerating environmental improvements in the Severn Trent region, creating bathing quality rivers, replacing lead supply pipes, building a sustainable flood-resilient community, and installing smart meters for customers.
In a statement announcing the share issues, the Board said:
“The projects represent a significant incremental investment opportunity over the next four years. …The projects will drive RCV growth significantly ahead of previous expectations, on which the company will earn a future return, whilst maintaining its current capital structure.”
“The Board's belief is that the Placing, Retail Offer, and Subscription are in the best interests of shareholders and the company's wider stakeholders.”
The award of £565 million of new investment from Ofwat's Green Recovery programme will increase RCV real growth during AMP7 from 3.8% to 10.4%.
Severn Trent has today separately published its preliminary announcement of annual results for the year to 31 March 2021.
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