Statement re Severn Trent Water's AMP4 Business...

Severn Trent Plc: Severn Trent Water's AMP4 Business Plan

7 May 2004

Severn Trent Water has today published on its website its Final Business Plan,
'the Plan', which was submitted to Ofwat last month. This follows from a draft
Business Plan, 'the Draft Plan', published in August 2003. The Plan includes
the asset management plan and the associated prices which will apply to
customers' charges for the five year period 2005 to 2010.

The Plan is forecasting an increase in the average household bill from the
current charge of £210 to £267 in 2009/10, excluding inflation. The profile of
price increases is shown below on two bases. Firstly, the 'unadjusted profile';
the basis used for the Draft Plan, whereby prices follow the incidence of
costs. Secondly, adjusting that price profile to mitigate the price effect for
customers in 2005/06 'the smoothed profile'. The average bill below is based on
the smoothed profile (all at 2002/03 prices):

                               Price Cap Profile                               
                                                                               
                   2005/06   2006/07   2007/08   2008/09   2009/10  Cumulative 
                                                                               
Price Increase      15.5%     5.9%      2.4%      1.5%      1.2%       28.6%   
                                                                               
'K' Unadjusted                                                                 
                                                                               
Plan Price          11.0%     11.0%     2.1%      2.1%      2.1%       31.1%   
                                                                               
Increase 'K'                                                                   
                                                                               
Smoothed                                                                       
                                                                               
Average Bill        £230      £252      £256      £261      £267        £57    

The Plan has been submitted to Ofwat on the 'smoothed price' basis.

The Plan includes an investment programme of almost £2.9 billion for the 5 year
period (at 2002/03 prices). The revenue requirement is calculated on the basis
of a post tax real, weighted average cost of capital of 5.3%. The effect of
price smoothing, which is net present value neutral, produces a return less
than 5.3% in the early years of AMP4 compensated by a higher return in its
later years.

The Plan forecasts a closing Regulated Capital Value, (RCV) at 31 March 2010 of
around £5,700 million (at 2002/03) prices. Allowing for inflation at 2.5% per
year, this produces an outturn RCV at 31 March 2010 of around £6,800 million
with an accompanying outturn debt:RCV ratio of around 54%.

Commenting on the Plan, Severn Trent Water's Managing Director, Brian
Duckworth, said 'We believe we have produced a comprehensive plan which
carefully balances the expectations of all our stakeholders for the next five
years'.

'We have tried to balance the reasonable expectations of our customers for
service improvements with the need to deliver sustainable returns for our
investors. We also need to meet all the new improvements which Ministers expect
of both our drinking water quality and the effluents from our sewage treatment
works'.

The Plan includes a number of changes to the Draft Plan including assumptions
in the area of efficiency, returns, investment, operating costs and price
smoothing. Certain financial information is presented in 2002/03 prices as this
is the price base for regulation reporting. Further details of changes from the
Draft Plan, together with a summary of the Plan itself are available on the
company's website (www.stwater.co.uk/finalbusinessplan).

AMP4 Final Business Plan Contact Details and Disclaimer

ENQUIRIES FRIDAY 7 MAY 2004

Brian Duckworth                   Severn Trent Water   0121 722 4764    
                                                                        
Managing Director                                                       
                                                                        
Mark Wilson                       Severn Trent Water   0121 722 4764    
                                                                        
Finance and Regulation Director                                         
                                                                        
Julian Wais                       Severn Trent Plc     0121 722 4764    
                                                                        
Head of Investor Relations                                              

AFTER 7 MAY 2004

Brian Duckworth:     0121 722 4938      
                                        
Mark Wilson:         0121 722 4764      
                                        
Julian Wais:         0121 722 4295      

Footnote:

The Severn Trent Water (Severn Trent) final business plan is only part of the
process of discussing terms with OFWAT in relation to the next price review.
The document is not a profit forecast. Whilst Severn Trent's final plan is an
important document for the discussions that will be taking place between OFWAT
and Severn Trent, it is the nature of the price review process that the actual
plan approved by OFWAT following its determination of the price review may
differ from Severn Trent's final plan in material respects.

Accordingly any such information as supplied to OFWAT and disclosed by Severn
Trent or OFWAT must not be relied upon by any investor and does contain
financial modelling based on estimates and assumptions which may be
significantly varied.

This document contains certain 'forward-looking statements' with respect to
Severn Trent's financial condition, results of operations and business and
certain of Severn Trent's plans and objectives with respect to these items.

By their very nature forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to events and
depend on circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ materially
from those expressed or implied by these forward-looking statements.

Except as required by the rules of the UK Listing Authority and the London
Stock Exchange, Severn Trent Plc and its subsidiaries and associated companies,
including Severn Trent, undertake no obligation to update or publish any
information that is referred to above.

Without prejudice to the above, whilst Severn Trent Plc accepts liability to
the extent required by the Listing Rules of the UK Listing Authority for any
information contained within this document which Severn Trent Plc makes
publicly available as required by the Listing Rules;

   a)    neither Severn Trent Plc nor any other member of the Group or       
         persons acting on their behalf shall otherwise have any liability   
         whatsoever for loss howsoever arising, directly or indirectly, from 
         use of the information contained within this document;              
                                                                             
   b)    neither Severn Trent Plc nor any other member of the Group or       
         persons acting on their behalf makes any representation or warranty,
         express or implied, as to the accuracy or completeness of the       
         information contained within this document.                         

Please refer to the more detailed summary of the Severn Trent final business
plan on www.stwater.co.uk/finalbusinessplan together with the full terms of the
disclaimer applicable to this announcement.

Ends