Committee publication · Correspondence · 25 March 2025
Correspondence from Liv Garfield, Severn Trent Water, following Reforming the water sector inquiry evidence session on 26 February, dated 10 March 2025
From: Environment, Food and Rural Affairs Committee
Inquiry: Reforming the water sector
Summary
Liv Garfield, Chief Executive of Severn Trent Water, clarifies two issues raised during the committee's 26 February evidence session: the purpose and structure of Severn Trent Trimpley (a corporate entity managing timing differences between regulatory and accounting earnings), and the justification for dividend payments. She argues dividends are justified by performance over appropriate time horizons and emphasises the company's £15 billion five-year investment programme.
Key findings
- Trimpley was established in 2017 to manage mismatches between regulatory earnings (five-year periods) and IFRS accounting standards (single-year basis), providing flexibility without changing overall bills, dividends, or company value
- An international accounting standard change (expected adoption by 31 March 2027) will render Trimpley redundant, addressing the timing differences it was designed to manage
- Severn Trent's average dividend over 10 years is just under £1 per share (approximately 4% yield); the company raised £1.25 billion in new equity in three years to support infrastructure investment
- Dividend cover over the last 10 years averaged 1.14 on IFRS earnings basis; regulated earnings exceeded dividends by £471 million across AMP6 and first four years of AMP7
- Severn Trent plans to invest £15 billion in the Midlands over five years and reduce operational harm to rivers to less than 2% of overall total
Tone
ProceduralTopics
Key actors
Liv Garfield, Severn Trent Water, Severn Trent Trimpley, Ofwat, International Accounting Standards Board, Environment, Food and Rural Affairs Committee
Notable line
“Whilst the flexibility is important to us, in practice we have never needed to make use of it given the retained earnings we have held.”
Key Quotes
“Over a five-year period, Trimpley is not designed to change customers' overall bills, the overall amount of dividends we distribute nor the overall value of Severn Trent Group.”
“The purpose of Trimpley is instead to help us address the widely-recognised mismatch between IFRS earnings (that look at revenue over a single year) and the regulatory model (that looks at things over a five-year period).”
“We intend to adopt the new standard as early as possible, likely to be the year ending 31 March 2027, and have already started our migration planning to ensure that we have in place the systems and processes required to do this.”
“By maintaining a comparatively modest but predictable dividend, we have been able to raise £1.25 billion in new equity over the last three years to support the acceleration of our investment programme.”
“I am pleased with the progress Severn Trent has made over the last ten years – as our performance measures show – but I am the first to admit that there is much more for us to do.”
Source · parliament.uk record ↗