Committee publication · Correspondence · 18 June 2025
Correspondence from Liv Garfield, CEO, Severn Trent Water regarding Reforming the water sector inquiry, dated 6 June 2025
From: Environment, Food and Rural Affairs Committee
Inquiry: Reforming the water sector
Summary
Liv Garfield, CEO of Severn Trent Water, responds to the Environment, Food and Rural Affairs Committee's inquiry into water sector reform. She defends the Trimpley structure—a subsidiary created in 2017 to reconcile accounting differences between regulatory and IFRS earnings—stating it has never been used, did not impact dividends or bills, and will be dismantled when new accounting standards take effect in 2027. The letter provides detailed evidence of regulatory approval, auditor clearance, and Financial Reporting Council endorsement.
Key findings
- Trimpley was established in 2017 to manage timing differences between regulatory and IFRS earnings, particularly ODI (Outcome Delivery Incentive) rewards; it has never been utilised despite eight years of operation.
- Between 2017 and 2024, Severn Trent had £2,158 million available in distributable reserves excluding Trimpley but paid only £1,615 million in dividends, demonstrating the structure did not enable excess dividend payments.
- The Financial Reporting Council completed an enquiry into Trimpley's accounting treatment and concluded the company's explanations and valuations were satisfactory, with no criticism of disclosure practices.
- Severn Trent committed to dismantle Trimpley by 2027 when new IFRS accounting standards are adopted that will eliminate the timing differences the structure was designed to address.
- Remuneration bonuses for all employees, including executives, are funded from non-regulated commercial business (£180m turnover), not customer bills; customers do not pay for executive bonuses.
Tone
ProceduralTopics
Key actors
Liv Garfield, Severn Trent Water Limited, Ofwat, Financial Reporting Council, Deloitte LLP, PricewaterhouseCoopers, Environment Agency, International Accounting Standards Board
Notable line
“We plan to adopt this new standard at the earliest opportunity and have already begun our preparations to do so. We anticipate that this will take place in the year ending 31 March”
Key Quotes
“We have not needed to utilise the flexibility afforded by Trimpley at any point since its creation eight years ago. This also means that Severn Trent's dividends, taxes and customer bills have not been impacted in any way by Trimpley.”
“When we adopt this new standard, we can confirm that we will dismantle the Trimpley structure because the changes to IFRS accounting will mitigate the risk it was introduced to address.”
“The company explained the rationale for the transactions and provided a satisfactory explanation of how the balances had been assessed for impairment.”
“Customers do not pay for executive bonuses. Whilst bonuses for executive directors are dependent on the performance of our regulated business Severn Trent Water (using the above weightings), the actual bonuses are funded from our non-regulated commercial business.”
“… our dividend over the last five years has been built up from two components: • The base return that Ofwat sets for companies every five years is referred to as the cost of equity. As part of the cost of equity Ofwat approved a base dividend yield for all companies of 4.0 percent in its PR24 final determinations.”
“The remuneration policy was approved in 2024 by 95 percent of shareholders, with independent institutional proxy voting agencies such as the Investment Association and Institutional Shareholder Services (ISS) recommending support.”
Source · parliament.uk record ↗