28th Jan 2015 07:32
LONDON (Alliance News) - Severn Trent PLC Wednesday launched a GBP100 million buyback programme and joined peers in linking its dividend growth in coming years to retail price index inflation, after it accepted the UK water regulator's final determination on the pricing regime for the next five years.
In a statement, the company said it had reviewed its financing and dividend plan in light of the capital it needs to deliver on its operational plan for the next five years, and taking into account the lower cost of capital allowed by regulator Ofwat.
It said that it will now manage its existing debt portfolio as well as any future debt issuance by increasing the proportion which is held at floating rates. It will also move towards a net debt to regulatory capital value ratio of about 62.5%, and as part of this move it is launching a GBP100 million share buyback programme.
The company said it will pay a total dividend of 84.90 pence for the 2014/15 financial year, cut it by 5% to 80.66 pence in 2015/16, but will then join peers United Utilities PLC and SSE PLC in increasing its dividend by at least the inflation rate measured by the retail price index until March 2020. That's a downgrade from its current policy of paying RPI plus 3%.
"At Severn Trent we always seek to strike the right balance between the service customers receive, the bills they pay, and returns to investors and we believe our plan for the next five years achieves that balance, delivering better services, better value and a healthier environment. The price review has been a challenging process but has led to a great outcome for customers," Severn Trent Chief Executive Liv Garfield said in a statement.
In a separate statement, the water company said new Chief Financial Officer James Bowling will join the company on March 16 and then take on the role on April 1 after a handover period with current CFO Mike McKeon.
McKeon will remain with the business until May to assist Garfield with "the delivery of key strategic projects".
By Steve McGrath; [email protected]; @stevemcgrath1
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