Draft Business Plan 2010 to 2015

Severn Trent Water submits Draft Business Plan to Ofwat

In common with the rest of the water industry, Severn Trent Water has today
submitted its draft business plan to Ofwat for the period 2010 to 2015. This
plan sets out the company's proposals for delivering water and wastewater
services and includes forecasts of revenues, costs, investment, maintenance,
proposed price limits and planned improvements to services over the five-year
period.

This plan aligns to the company's 25 year Strategic Direction Statement
(published in December 2007, which is available on its website at 
www.stwater.co.uk/sds) and reflects customer priorities including a more
resilient water supply network, stable bills and a smaller carbon footprint.

Tony Ballance, Severn Trent's Director of Regulation and Competition, said: "We
believe our draft plan provides the best balance between improved services, the
needs of the environment and a cost that customers are willing to pay while
maintaining investor confidence. Our proposals are anchored in research, in
which customers have told us about their requirements and priorities."

The key elements of the draft business plan include:

  * Broadly flat bills in real terms (rising only slightly above inflation over
    the five year period),
   
  * Challenging efficiency targets,
   
  * A capital investment programme of around £3.2 billion (at today's prices)
    in the period 2010 to 2015, around 23% more than in the current period.
    This level of investment is needed to deliver improved services, such as
    stronger network resilience (including reinforcing the network following
    last summer's flooding) and reduction in sewer flooding, environmental
    improvements through improving sewage treatment, and increased spending on
    assets to ensure that environmental and drinking water quality improvements
    achieved in the past two decades are continued,
   
  * An assumed cost of capital of 4.94% real, post tax, consistent with
    maintaining an appropriate credit rating to allow the company to raise the
    funds it requires to finance future investment at a reasonable rate. The
    company's plans cannot be financed by customers' bills alone and
    shareholders expect an adequate return on their investment. The company
    published a paper "The World has turned: but which way?" on 5 August 2008
    setting out its views on issues to be considered in how the weighted
    average cost of capital (WACC) should be determined. This is available on
    its website at www.severntrent.com.
   
Severn Trent welcomes views on the draft business plan, an overview of which
has been published on its website this morning. Comments can be emailed to 
[e-mail]

Enquiries:

Peter Gavan                  Severn Trent Plc         0121 722 4310            
                                                                               
Director of External Affairs                                                   
                                                                               
Venetia Cooper               Severn Trent Plc         0121 722 4523            
                                                                               
Investor Relations Manager