13th Dec 2018 11:51
LONDON (Alliance News) - UK Water regulator Ofwat said Thursday it will reset Severn Trent PLC's sewer flooding and pollution targets and amend its outperformance payments at the start of 2019.
Severn Trent provides contract services for water and waste water treatments and also owns water company Severn Trent Water.
Severn Trent Water's waste water customer outcome delivery incentives, or ODIs, are set to be amended by Ofwat, with tougher targets and a higher cap on outperformance payments.
The cap on waste water customer ODIs will be raised to 2.6% of return on regulated equity from 2% in 2019. This increases maximum outperformance payments to approximately GBP200 million from around GBP155 million.
Moreover, targets for internal and external sewer flooding and pollution incidents are to be toughened, set at the rates achieved in its prior financial year, which ended in March. The incentive rate for external sewer flooding will also be cut to GBP2,967 per incident.
Severn Trent expects these changes to have a "limited impact on customer ODIs" in the remainder of its financial year. Guidance for a net neutral customer ODI position in its financial year remains in place.
However, in its year to March 2020, it expects to have the opportunity of receiving further outperformance payments on is longer term customer ODIs.
For 2018, Severn Trent Water will receive a GBP24.9 million wastewater outperformance payment from Ofwat due to "major progress in sewer flooding and pollution".
However, it has also incurred an underperformance payment GBP29.6 million for its water due to supply interruptions, leakage, and drinking water complaints.
South West Water Ltd, which is owned by Pennon Group PLC, has underperformed on pollution incidents and will be required to make a GBP270,000 underperformance payment.
Anglian Water Group Ltd will receive a GBP4.6 million outperformance payment for reducing leakage.
Shares in Severn Trent were up 0.2% at 1,892.00 on Thursday. Pennon shares were 0.2% higher at 724p.
Related Shares:
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