Qatar Takes Stake in Water Group Severn Trent, Plans £12.9bn Investment
In a move to fund a new investment plan, Severn Trent, responsible for a vast area spanning from the Bristol Channel to the Humber, and from mid-Wales to the East Midlands, has attracted a £500 million investment from the Qatari sovereign wealth fund. This investment will contribute to the company’s ambitious £12.9 billion investment programme aimed at improving its environmental credentials.
Severn Trent’s investment plan, set to run from April 2025 to March 2030, will focus mainly on upgrading the natural environment and aims to create up to 7,000 job opportunities across the Midlands. Additionally, the company expects a 30% decrease in storm overflow spills and a 16% reduction in leakages.
Out of the £12.9 billion investment, £5 billion will be allocated to enhancing capacity and service levels beyond the current standards. The majority of the funds will be dedicated to improving the natural environment, with an additional £700 million going towards boosting water supply levels. Moreover, £400 million will be allocated to ensure the company achieves operational net-zero status by the next decade.
To finance these measures, a share placing worth £1 billion is being implemented, with the Qatar Investment Authority contributing half of the amount and the remaining half raised from institutional investors. A retail placing is also available, aiming to raise almost £7 million from individuals.
While the investment programme is expected to lead to a rise in average annual water bills for households from £379 to £518, Severn Trent has committed to providing a £550 million support package for customers who face difficulties in paying their bills due to current cost-of-living pressures.
The investment plan will be submitted to water regulator Ofwat on October 2nd. Severn Trent’s CEO, Liv Garfield, expressed her goal of transforming the company’s network to provide customers with the highest quality service by 2030. She emphasized the commitment to a sustainable future, with a focus on healthier rivers, job creation, fewer leaks, and a resilient water supply to combat the impacts of climate change and population growth. The company aims to ensure that every customer in their region can afford their water bills.
Recent controversies involving sewage discharges and leakages into rivers and beaches have tarnished the reputation of UK water firms. In 2022 alone, approximately 390,000 such incidents were reported in Great Britain. Severn Trent acknowledged its shortcomings in addressing these issues in its annual results published in May. The water industry as a whole has faced criticism for accumulating substantial debts while rewarding shareholders with significant dividends and providing executives with generous compensation packages.
Despite these challenges, Severn Trent shares rose by 2.6% following the announcement of the Qatari investment, reaching £23.24. However, the shares have experienced a decline of approximately 13% so far this year.
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