Committee publication · Correspondence · 2 September 2025
Correspondence from Severn Trent regarding legal fees, dated 1 August 2025
From: Environment, Food and Rural Affairs Committee
Inquiry: Reforming the water sector
Summary
Severn Trent Water responds to parliamentary committee questions on Trimpley asset valuation methodology, financial resilience safeguards, and legal costs. The company details PwC advice received, explains fair-value accounting principles applied to its 49% shareholding, describes treasury and liquidity management controls, and discloses £407,248 in external legal fees (AMP7 period), plus £1.96m defending a competition law claim now under appeal.
Key findings
- PwC provided no specific written advice on which valuation methodology to apply to Trimpley assets; the valuation methodology was subject to Financial Reporting Council assessment and company response.
- Severn Trent Water's 49% shareholding in Trimpley valued using fair-value approach per IFRS 13, based on present value of underlying monetary assets (loan, accrued interest, tax liability) with risk-adjusted discount rates.
- £407,248 in external legal fees incurred during AMP7 (April 2020–March 2025) across regulatory actions by Environment Agency, Drinking Water Inspectorate, and Ofwat; additional £1.96m spent defending competition law collective action claim brought by Leigh Day, now under appeal.
- Severn Trent received 40 regulatory actions (4 prosecutions, 36 enforcement notices/orders); company states compliance with all court judgments and enforcement notices, with one ongoing prosecution where it pleaded not guilty to one charge.
- Board risk management includes £1.5bn funding raised in past year, diversified capital structure (60% fixed-rate debt), 15-month liquidity headroom policy, and pension deficit recovery plans with hedging strategies to manage downside risks.
Tone
FactualTopics
Key actors
Severn Trent Water, Severn Trent Plc, PwC, Financial Reporting Council, Environment Agency, Drinking Water Inspectorate, Ofwat, Leigh Day
Notable line
“PwC did not provide specific written advice on which of the possible methodologies to apply in valuing the various assets that form the Trimpley structure.”
Key Quotes
“The only written advice received from PWC in relation to Severn Trent Trimpley was provided to the committee with our last correspondence. PwC did not provide specific written advice on which of the possible methodologies to apply in valuing the various assets that form the Trimpley structure.”
“A market participant would calculate the present value of the loan due from Draycote by discounting the contractual cash flows using a risk-adjusted discount rate. This is the same approach that was used to assess the arms-length interest rate to be applied to the loan when it was renegotiated as at 22 March”
“In AMP7 we incurred £407,248 (excluding VAT) in external legal fees across all the areas specified in your question, apart from £1,956,463 which has been incurred in relation to a single competition law collective action claim, initially brought by Leigh Day …”
“Severn Trent has received 40 regulatory actions, of which there have been 4 prosecutions brought and 36 enforcement notices or orders issued.”
“The Group maintains liquidity headroom of at least 15 months in line with the Board- approved Liquidity Policy and the Group has committed credit facilities for five years.”
Source · parliament.uk record ↗