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Severn Trent Says Considering Ofwat's Proposal To Raise Customer ODI Cap

Severn Trent Plc (SVT.L), a UK water and waste water company, said Thursday that it is considering the Water Services Regulation Authority, or Ofwat's proposal to increase the customer Outcome Delivery Incentives or ODI cap.

Earlier this year, Severn Trent Plc applied to lift the cap on its waste water customer ODIs, in line with the methodology prescribed by Ofwat. The company said its application followed a survey of over 4,000 customers, of whom 72 percent supported the principle of uncapping.

Severn Trent said it noted two items from Ofwat's publication 'Draft determination of in-period ODIs for 2018', released today morning.

This includes an adjustment to Severn Trent's 2017/18 supply interruptions customer ODI performance, resulting in a net outperformance payment across all customer ODIs for 2017/18 of 72 million pounds in 2012/13 prices pre-tax.

The second item is a proposal to increase the AMP6 cap on Severn Trent's waste water customer ODIs from 2.0 percent to 2.6 percent of Regulated Equity, which would increase the potential AMP incentives by about 56 million pounds in 2012/13 prices pre-tax. AMP6 is the Asset Management Period 6, from 2015 to 2020.

Ofwat's proposal is to also reset performance level targets for internal and external sewer flooding and pollutions to the level achieved in 2017/18, and reduce the incentive rate for external sewer flooding by 85 percent, for the remaining two years of the AMP.

Severn Trent said it will now assess the proposal outlined in the consultation document and respond to Ofwat in due course.

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