UK water company Severn Trent to raise £1bn to tackle pollution

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British water company Severn Trent will raise £1 billion through the issuance of new shares to tackle sewage leaks and pollution problems. A few months ago, the company was one of four companies fined for thousands of leaks between 2018 and 2022.

The company said the share sale would raise 500 million pounds from institutional investors, 500 million pounds from the Qatar Investment Authority and up to 7 million pounds from retail investors. An unspecified number of company directors will buy shares worth £275,000 each.

The funding will support a five-year £12.9bn spending plan, with £5bn to “increase capabilities and services beyond current levels” to reduce overflow leaks and contamination by 30% each and reduce leakage Volume decreased by 16%.

The company said the plans would create 7,000 jobs in the Midlands and include a £550m package “to support 693,000 customers who may struggle to pay their bills”.

The news comes as the water utility prepares to submit a draft business plan to water regulator Ofwat on Monday, which will seek a significant increase in fees to pay for investment in infrastructure such as reservoirs, pipelines and treatment plants.

The average water bill per household is £448, but plans are set to increase by hundreds of pounds by the end of the century. The exact amount of the increase is not yet known, with Ofwat not set to approve the scheme until December next year.

The Environment Agency fined Severn Trent and three others £94 million at the end of May, including a £90 million fine on Southern Water.

Activists say the EPA is woefully underfunded and more companies will be prosecuted for discharging sewage into rivers and oceans more than 300,000 times in 2022 alone.

In the 34 years since the water monopoly in England and Wales was privatized, equity injections have been rare. But Anglian Water, Southern Water, Thames Water and Yorkshire Water have all received cash from shareholders in the past three years.

Severn Trent’s share offering will be led by BofA Securities and Morgan Stanley, with Citigroup acting as joint bookrunners and Rothschild acting as financial advisor.