There was clear insight into the looming costs of modernising the UK’s water industry today, when Severn Trent announced a £1 billion share sale.
The capital raising came alongside plans from the FTSE 100 utility giant for spending of almost £13 billion for the next phase of its business plan. The rest of the industry is due to file new five-year plans with regulators next week.
Much of the next round of spending will on cutting the overspills of raw sewage and the mass leaks of fresh water from supply pipes that have left the water industry reeling from a wave of public anger.
Severn Trent’s market value is around £6 billion. It supplies almost five million homes from the Bristol Channel to the Humber. The new five-year plan runs from April 2025 to the end of April 2030 and is the first sign of the extent of industry spending in that period.
London’s supplier, Thames Water, has 15 million customers, or about a quarter of the UK population. It has been grappling with a £14 billion debt burden and its investors have already stumped up £750 million in fresh cash in July. Its next five-year plan has not been released.
Thames was told this week to cut household bills by £100 million next year after regulators cracked down on wider inadequate performance in the industry toward cutting sewage spills and leaks.
Severn Trent’s £4-million-a-year boss, Liv Garfield, hit the headlines this summer with a different kind of leak. In an email to other senior utility executives, she suggested setting up “an off-the-record roundtable” discussion group. It came amid calls from the general public for the re-nationalisation of water companies.
Today’s City fundraising was immediately backed by one of the world’s major sovereign wealth funds. Qatar Investment Authority will snap up half of the stock on offer. The remaining £500 million is priced at 2150p per share for institutional investors according to newswire reports.
Retail investors will be able to buy into a smaller sale, which could raise around £7 million.
Severn Trent’s stock rose 40p to 2306p.
City experts were not expecting the Severn Trent share issue, but pointed out that the rally for the stock after the announcement was a clear sign it was well-received on the market. Usually, a share issue leads to an immediate slip in price, ahead of the increased supply in stock.
