Severn Trent has set out its plans for a package over £730 million of investments as part of the Green Recovery - if approved, the company expects to start work on the new investments within a matter of weeks of getting the go-ahead.

The water company said that only 15% of the cost would go directly on to customers’ bills – Severn Trent will provide 85% of the funding needed upfront by raising new finance which will then be recovered over a longer time period. Severn Trent estimates that the cost to customers will be £6 extra per year on average.

According to in its latest trading update for the period 1 October 2020 to 4 February 2021, the utility is currently in constructive dialogue with Ofwat and DEFRA on the potential investment opportunities for Severn Trent as part of the Government's Green Recovery initiative.

The update says the utility is continuing to deliver strong operational performance and resilient financial results and remains confident of delivering full-year results in line with expectations.

Green Recovery investment opportunity

Severn Trent submitted its proposals to Defra and Ofwat at the end of January – the next step is for Defra and water industry regulators, including Ofwat, to review the plans. If approved, the company expects to start work on the new investments within a matter of weeks.

“As well as providing meaningful RCV4 growth on top of our c.4% growth rate for AMP7, we believe our proposals would support our environmental ambitions, create much needed jobs in our region and support national sustainability objectives on climate change, flood resilience, river water quality and water consumption.”

Severn Trent is proposing the following schemes:

Creating bathing rivers

Severn Trent will transform important stretches of rivers (49km in total) between Coventry and Stratford on the River Avon, and around Ludlow on the River Teme so they are healthy enough to swim in for the one million people living nearby.

The water company will:

• Work with farmers to prevent pollution from an area the size of Greater London (150,000 hectares of farmland) getting into rivers- run-off from farmland is a significant cause of river pollution.
• Install ozone effluent disinfection at six sewage treatment works (STW) and significantly rebuild the STW at Warwick.
• Build new storage and sewer capacity so it can either disconnect or significantly reduce the environmental impact of 25 storm overflows.

The work will create around 330 jobs directly and a further 310 within the sector.

Indicative cost: £153 million

Protect homes from flooding

In collaboration with the Local Authority and working with the local council, Severn Trent is aiming to protect around 90,000 people by trialling a large-scale rollout of a nature-based approach to the risk of flooding in Nottinghamshire. The water company will work closely with local councils to install natural surface flood defences such as green embankments, ponds and grassed areas.

Starting in the Mansfield area, Severn Trent will create the first catchment-scale flood-resilient community – the nature-based solutions will included installing over 15,000 blue-green interventions to store the equivalent of 58,000m3 of surface water in nature.

The utility will work in partnership with the local council and others to install and maintain a mixture of ‘blue-green’ soft infrastructure – for example, rain gardens, drainage ponds and permeable hard paving. Target areas will prioritise financially vulnerable customers.

In addition to creating around 15 hectares of biodiversity-rich habitat, the work will also reduce 58,000m3 of storage requirement in sewers and improve water quality, including reducing the risk of storm overflows being triggered at around 20 discharges.

The work will create around 390 jobs directly and a further 380 within the sector.

Indicative cost: £85 million

Lead pipe removal from customer-owned supply pipes

Instead of tackling the problem of lead by adding more chemicals, Severn Trent plans to fix the problem at the source by replacing old lead pipes in up to 30,000 homes to eradicate the source of lead in some customers’ water, reduce leakage and protect customers from the unexpected cost of having to replace their supply pipes.

Areas will be prioritised based on lead risk, estimated leakage and deprivation.

The company will work with local plumbers to replace 25,000 pipes in socially-deprived areas of Coventry and also trial new approaches to 5,000 homes in other areas to reveal insight on how to tackle the national problem, withdraw chemical use and reduce the 25% of leaks that come from the customer-owned pipes.

This will include replacing c1,000 lead and leaking pipes in a smaller, rural community in Shropshire to enable withdrawal of chemical treatment – this will set the path for the long term solution to reducing chemical dosing.

In addition, Severn Trent will work with the community in Worcester to offer grants and work with local plumbers to incentivise the replacement of c4,000 supply pipes. This will involve a controlled test to understand customers’ preference for who carries out the work.

The utility will trial lead detection technology and new replacement techniques, such as ‘core and vac’ techniques used in the gas industry, together with taking advantage of opportunities for joint supply pipe separation and increased metering.

The work will create around 240 jobs directly and a further 200 within the sector.

Indicative cost: £98 million

Smart metering - large-scale trial of 157,000 smart water meters roll out

Severn Trent is proposing to roll out a large-scale trial of 157,000 household smart water meters Install 157,000 smart water meters across Coventry and surrounding areas in Warwickshire to support leakage reduction, help customers to manage their water footprint, and reduce demand during peak usage periods.

The utility intends to target water-stressed areas with a programme of 91,000 replacement meters and 66,000 new installations.

The work will create around 80 jobs directly and a further 60 within the sector.

Indicative cost: £22 million

Accelerating environmental improvements

Severn Trent is looking to support environmental improvement to 500km of river, through accelerated delivery of its Water Framework Directive statutory obligations, including the delivery of 35 additional phosphate removal projects and improvements to storm overflows.

This will see the utility delivering benefits five years earlier than it would have done without the opportunity to contribute to the Green Recovery. Wherever possible, Severn Trent will maximise the use of chemical-free solutions such as enhanced biological phosphate removal (EBPR), and, in some cases, constructed wetlands.

The company will introduce additional monitoring and investigative measures at 150 sewer overflows and fast-tracking improvements at 100 overflows – this work will include:

• Upgrading chemical dosing and installing enhanced tertiary solids removal using modern technologies.
• Increase event duration monitor coverage from 78% to 100%.
• IT improvements to facilitate near real-time, public reporting of sewer overflows.
• Interventions such as raising weir height or increasing pump capacity on short-duration, low-volume sewer overflows.

The work will create around 280 jobs directly and a further 270 within the sector.

Indicative cost: £168 million

Decarbonising water resources

Severn Trent plans to provide an extra 109 Ml/d of additional water supply with a net-zero carbon impact.

The work includes starting to use the 65 Ml/d abstraction licence the utility bought from a decommissioned power station at Rugeley and working in partnership to create combined flood/drought storage which will effectively provide 40 Ml/d of ‘new’ water.

Severn Trent also intends to transport water via rivers, thereby saving engineering costs and reducing carbon, and to upgrade treatment works to accommodate new sources of water.

It also proposes to help 3,000 financially-stressed businesses save money and reduce waste by retro-fitting grey water and smart storage systems, saving up to 4 Ml/d.

Part of the company’s plan is to re-purpose a disused local asset to store flood water – which will have the added benefit of reducing flood risk for 4,000 at-risk homes and businesses close to the River Severn. Benefits will also include enhancing 46 hectares of habitat to deliver a net gain in biodiversity.

The work will create around 240 jobs directly and a further 220 within the sector.

Indicative cost: £206 million

Update - outperformance guidance on Customer ODIs increased from 'at least £25 million' to 'at least £50 million'

Commenting on its performance for the trading period 1 October 2020 to 4 February 2021, Severn Trent said it remains on track for its best ever performance on a number of measures, including the Compliance Risk Index and water quality complaints. It had also started AMP7 strongly with 25% fewer blockages and a 15% reduction in pollutions in the calendar year. The company’s biodiversity programme is on track to deliver over 2,200ha of enhanced natural environment, delivering its five-year target in the first year of AMP7.

The trading update says Severn Trent remains on or ahead of target for almost 80% of its customer performance measures. The company has therefore increased its guidance for outperformance on Customer Outcome Delivery Incentives this year from 'at least £25 million' to 'at least £50 million'.

Severn Trent said:

“We remain confident of delivering our full-year results in line with expectations and prior guidance. The Severn Trent Plc Board confirms this year's final dividend in line with our AMP7 policy.”

According to the update, the company’s proposed Green Recovery investments will make a real difference – the update says:

“The Severn Trent region will be greener, safer, more resilient to climate change, and more prosperous. We calculate that, alongside the 3,000 jobs supporting the projects, these investments could create an additional 7,000 indirect jobs – a total impact of 10,000 jobs – fuelling the Green Recovery by helping families back into work.

“We’re keen to recruit local people, and our new state-of-the-art Academy has a big role to play here. It has the facilities and staff to train people from the ground up, giving us the ability to improve skills across our region.”

Click here to read the Severn Trent Green Recovery proposals in full