Severn Trent is maintaining continued momentum and fast-track status to build a strong platform for the upcoming AMP7 2020-25 investment period, according to the preliminary announcement of its annual results for the year to 31 March 2019 published today.

The company said it is continuing its leading AMP6 performance and maintaining the lowest average combined bills in England and Wales, at £354 and £312 respectively, set to continue to at least 2025.

Severn Trent said it “had a mixed performance on water, with an operationally challenging first half”, followed by a strong recovery in the second. The hot, dry summer cost the utility £10 million in direct costs and £12 million in operational recovery which it had managed to absorb.

Commenting on the new AMP7 measure of customer service (C-MeX), which will be partly based on customer contact, as with SIM, and partly on customer perception, the results describe Severn Trent’s SIM performance in AMP6 as disappointing – “for those few customers that have reason to contact us, our response is just not consistently good enough.”

Severn Trent has also reported excellent progress on its capital programme with the largest year of capital spend in a decade of £769 million. It expects to earn at least £25 million in customer ODIs in FY2019/202, increasing the amount of outperformance payments rolled into AMP7 to at least £177 million.

Partners have already been appointed for around £1.5 billion of its £2 billion AMP7 capital programme. The new capital delivery model, with a broader supply chain and in-house design team, is progressing well, the company said. 

The water company has begun to embed its new capital delivery strategy, which includes working with a much broader range of partners – Severn Trent will be using 20 partners, rather than the six tier one partners in AMP6. “This will give us direct access to a much broader range of skills and expertise and allow bespoke supplier selection across our range of projects,” the company said.

Severn Trent is now in the process of insourcing its design team which it said will provide it with more control over the investment programme, help design assets to deliver operational efficiency and take a more holistic view of the environmental and societal impact of its schemes.

The utility is on track to exceed 50% renewable energy self-generation target in FY19/20, boosted by the acquisition of Agrivert UK renewables business, contributing to overall Group net carbon emissions reduction of 41% since the beginning of AMP6.

Commenting on catchment management, Severn Trent said typically the industry had focused on “spot interventions rather than addressing the true root causes and drivers of performance.

“We really understand our end-to-end process and how changes at a component level can cause a chain reaction through our system. This is clearly demonstrated in the area of catchment management, where we have delivered improvements in water quality, environmental benefits and long term totex efficiencies, and earned a specific ODI reward of £11 million this year.”

Citing the prevention of pesticides from entering the watercourse from farms near its Tittesworth Water Treatment Works as an example, the company was able to save £400,000 of capital expenditure and £40,000 of annual operating costs.

Liv Garfield, Chief Executive, Severn Trent Plc, said:

"This has been a year where our teams have really stepped up, whether in response to customer needs in the face of one of the hottest and driest summers we've seen or by being named by Ofwat as one of the top companies in the sector when we received fast-track status for our future plans.

At the heart of all of that is our drive to succeed for all of our stakeholders, which is shown in the results we're announcing today. They demonstrate not only that we can deliver for our investors but also that we're putting ourselves at the heart of the communities in which we live and work by building a lasting legacy for future generations.

Whether that's spending time in our region's primary schools exploring the importance of using water the right way, bringing an employee's idea to life that finds an innovative new way to improve our services, or the investment we make day after day in maintaining our assets. By balancing the needs of everyone in this way, we are confident we are doing the right things for all of our stakeholders."