Severn Trent Plc

Brilliant. Good morning, everybody. I'm James Jessica, Chief Executive of 7Trend. And I just want to welcome all of you to my first results announcement. Obviously, 7Trend's annual results I'm joined here today, obviously, with Helen and the rest of the executive. I hope you've all had a chance to look through our results presentation, and we're looking forward to some really interesting questions. Now, before we start, there is a raise hand function. That is the best way to get yourself onto the system, and we look forward to the questions. So, I think there's already somebody in the queue. So, Julius, good morning. How are you?

Good morning, all good. Thanks a lot for taking my questions. I have two unsurprisingly on the topic of reopeners. So the first one is how did you come to this like 600 million number that you've announced today and how should we view this going forward for the next reopeners in the next coming years? Is that like a number that we could expect every year or does it depend on basically clarity on the remuneration of this? And that kind of leads me then to the second question. How do you think about funding from here? Because, I mean, I guess the $600 million is fully funded with your balance sheet, but do you believe there would be equity needs down the line if more opportunities like this come along? That would be quite useful. Thank you.

Thank you, Julius. Well, I'll give them an overview, and then I will hand to Shane to cover some of the specifics within the re-owner submission. So, first and foremost, We've got a really strong track record of delivering RCV growth. And you've seen just from this AMP in terms of our final determination, the 15 billion will deliver 60% RCV growth over that period. And when you compare that to the sector average of 50%, that's really strong. The way we've approached the re-opener process is really take into account all the things, obviously, that we've already got in flight. So let's not forget, as part of our fund determination, we secured for cyber, for PFAS, and for growth. And the re-opener process includes considerations around asset health, cyber, PFAS, and growth. So a lot of those we have already got covered through our business planning process. But what we are thinking about and how we arrived at the 600 million is how do we prepare our thoughts and our plans for the future? So we're already cognizant of AMP9 and transition spend and all that good stuff. So we're really thinking about how the re-opener process may actually help us in terms of that particular plan. And our focus has really been on how do we use particularly the asset health aspects to provide further information and details to support those plans going forward. So, in terms of what might happen for round twos and threes, we're not going to comment on that at the moment today. I'll come back to the equity answer in a second after Shane just puts more colour on the re-opening.

Yeah, thanks, James. So, yeah, whilst the 600 million extra investment is really important, the real prize from the re-openers is unlocking investment in asset health and that's critical for three reasons. The first is that all stakeholders, from CUNLIF, the government's white paper, the National Audit Office, have all called for more investment in improving asset health. The second reason is the price review mechanism hasn't traditionally allowed companies to increase funding to improve asset health. And third, which is relevant for 7Trent, is we are one of the largest companies. So we have the largest water network. We have the most water treatment works and distribution service reservoirs. On the waste side, we have the second largest sewage network outside, say, after Thames. And again, we have the second most driven works. So there's a lot for us to go at. And so that has really driven our approach in terms of the reopeners. So if you go to the specific cases, so distribution service reservoirs, we have 479 and we're proposing to invest 221 million to renew 2% of those. So again, a lot more opportunity in the future. On sewers, we have 93,000 kilometers of sewers. So we're proposing to spend $175 million on renewing 172 kilometres, but perhaps the most exciting part is we'll be doing AI-enabled inspections of just under 10,000 kilometres of sewers, and that will define the future renewal rate at PR29 and onwards. On boreholes, we'll be renewing 11% of our boreholes at a cost of $25 million. And then on growth, as James said, we had $700 million at PR24 for growth at Sewage Treatment Works, And whilst the world hasn't moved on that much in the 15 months since the FD, we have identified a bit more growth in eight catchments, so we're spending just over $50 million in those eight catchments to expand the treatment works. Brilliant.

Thank you very much, Shane. And in terms of the equity question, Julius, Now, we raised equity, as you will all be well aware, at the just price at the start of AMP A, and we were very clear that that would see us through to 2030. Those plans haven't changed. If you look at our performance over a period of time, we've not only been able to give gearing guidance at the end of the AMP, which obviously was in the range of 60% to 65% by 2030, we've also got some real choices through that outperformance. So if you think about ODI performance since 2021, we've delivered half a billion pounds worth of upside. On top of that, if you overlay things like the capital efficiency program, it really does give us choices. So more to come at some point in the future around our plans for two and three.

Okay, thank you, Julia. That's right, Sarah, welcome.

I understand you're calling from New York, so I dread to think what time it is there.

It's a perfect time of day for a seven-trend call.

Brilliant. Thank you, Sarah. Well, I appreciate you joining us.

Of course, of course. A couple of questions from me, please. So the first one's on the upgraded FY28 EPS guidance. Just wondering if you can walk us through the drivers of that. Obviously, today you've posted a very, very strong yet again ODI result, and that may contribute, given the T plus 2. And then secondly, on that ODI result today, just wondering if you can Walk us through a bit more colour on the areas of strength, the areas that remain development areas, work in progress, and then obviously that contributed today to a very strong Rory versus the guidance you gave in November. So, yeah, any more colour on the building blocks there as well. Thank you.

Okay, brilliant. Thank you very much, Cheryl. Well, I'll tell you what I will do. I will give a bit of an overview from an ODI perspective. I'll then hand to Steph to cover – I mean, Steph there does the bulk of the ODI delivery, and she can cover off some of the highlights from her perspective and some of the areas she's focused on. And then I will let Helen cover off the upgrade on guidance and perhaps the impact from a Rory perspective, if that's okay. In terms of ODIs, we are genuinely delighted with our performance. 78% of our metrics were green, which shows the strength of performance delivery across the business and across a whole suite of metrics, both for waste and water. That really does mean we are delivering for the customers and for the environment. Obviously nowhere near resting on our laurels and there's always more that we want to do, but we're delighted with the £73 million worth of performance. And we're also really pleased to set a guidance number of at least £50 million in nominal terms for next year. Again, just credit to the strong performance-driven culture that we've got within the business. Now, that, bear in mind, is also against the backdrop of some subtle changes. So we're seeing some shifts in pollutions. The Environment Agency are changing the classifications of pollutions and, of course, there will be an impact from how often they treat those. But that aside, we are still committing to deliver that level of performance, which just shows the strength and depth we've got across the business. I'll let Steph cover off some of the highlights.

Hi, Sarah. Thanks for the question. So, at Capital Markets Day last year, we said that we were going to go big on leakage, pollution and spills, and that's what we've done. So we've reduced pollutions by a third. We've reduced spills by 41%. And we've improved leakage by 8% year on year, which is absolutely fantastic. We've also had some really big wins on D-NEX and biodiversity, where we've met the cap, which is great. As Jane said, there's some changing targets this year. So standing still actually costs us £20 million. So we're already on the front foot and we're going after every single measure. So this year we've reduced floodings by 12%, but we're excited about what more we can do there, particularly using AI. So we've got Storm Harvester, which monitors the waste network. We think we've got some excellent improvements to make in that space. We've also now got 600,000 smart meters in the ground, which is going to help further with leakage and with PCC.

Brilliant. Thank you very much indeed, Steph. And I'll let Helen cover off the growth.

Thank you, James. Hi, Sarah. Good to see you. Yeah, so really, really pleased to be able to upgrade our guidance for FY28. And there's a few key drivers. Number one is obviously we've delivered much more strongly on ODIs than we were anticipating earlier when we gave the guidance. And you'll see that come through, our revenue. We've obviously had a stronger exit this year. We're at the lower end of our guidance for operating costs. And part of that is our drive for efficiency. And we're really confident that we've got a food programme, which is why today we've committed to £150 million of operating cost efficiency on top of the capital efficiencies that we'd already committed to. And to put a bit of colour on that, we are... We're using AI across the business, and that's really helping us. And I'm sure you'll hear some of that today about how we're using that. On our retail costs, we're better. We're benefiting from the rollout of our new billing system. And we're really focused on removing cost of failure as well. And we're really seeing the benefit of the insourcing we've done on waste for that. So our waste volumes are down year on year. as a result of getting things right first time. So there's a number of levers that give us confidence to upgrade that guidance. Do you want me to go back to the Rory question? Yes. So on Rory, there's a few things that are linked as well. So ODIs, obviously, better performance on ODIs, that flows through to Rory. And on financing, we've had another strong year. We've continued to beat the index on all of our new debt issues we've made some significant debt issues this year we've raised 1.8 billion in total and we've done that all at some of the tightest spreads in the sector and lower than the allowance and there is a benefit from inflation of course and one of the big items that we didn't know about when we gave the guidance was tax So in the Rory calculation, the off-what guidance came out after we've given the guidance, and it's the way we get credit for essentially deferred tax. The Rory assumes zero, but we actually get credit. So that's the driver of it. So we've just reflected the off-what guidance.

Brilliant. Thank you very much, Helen. Thank you, Sarah.

pav good morning morning james and team thank you for taking my questions and congratulations on a strong set of results i'll keep my questions maybe a bit bigger picture firstly james can you talk about your relationship with stakeholders politicians given we're now one year into the amp do you feel like support has increased or otherwise from politicians, customers in terms of your increased investment, obviously conscious that that's driven, you know, bill increases for customers. And secondly, in terms of the follow through from the cumulative review, we have the white paper at the start of the year. Can you remind us what else we should expect in terms of the timeline of the recommendations of the review being implemented, what legislation we should look forward to, and when we should expect to see some of those changes being meaningfully implemented? Thank you.

Of course, thank you, Pav. In terms of our relationship with stakeholders, I mean, we've always enjoyed a very strong relationship both with MPs of all parties and, of course, with regulators, and we see those as constructive relationships that need to be in constant dialogue, and we have maintained that, and we will continue doing that. So that is really positive. In terms of your question around customer support, In terms of our reopeners and, of course, our ODI performance, we are really conscious of potential bill impacts. We are in a cost-of-living challenge across many areas. We're seeing fuel prices increase. We're seeing energy prices increase, and we're really, really conscious of that. Hence, that was part of our consideration. But one of the things we did do is we actually spoke to a number of our customers. We surveyed the customers as part of our re-opener process, spoke to about 2,000 customers, and three quarters of them actually supported our approach because they could see that our investment proposals really helped growth and development in their particular local areas. We think it's vitally, vitally important to make sure that we have strong local connections and really in service of the needs of those particular local communities. So that's a big area of focus for us and has been, hence the re-opener process which we think will be a key to enabling those future investments as Shane articulated earlier. So very conscious of it, and I'll let Jude in a moment talk about some of the additional support we're providing from a customer perspective as well, just to give a bit more colour on that. In terms of the Conliff process itself, I mean, we wait and see, really. The Conliff has been the clear direction of travel for a while now. We obviously saw the white paper come from the government, and you will have all seen in the King's speech last week, that we basically, the director of travel was reiterating there will be a single regulator and the aim is to get a sector that is a strong performing sector that is investable but delivering for the good of society and that's absolutely aligned with our values. So in terms of timescales, we await the transition plan. Once that's out, we will obviously respond to it but in the meantime, we will carry on doing what we are good at and that is delivering for customers, for the environment and of course our shareholders. Now I'll hand over to Jude and he'll cover up some of the customer support that we've been given this year.

Hi Pavan, thanks very much for the question. As James said, we totally understand that higher bills can cause real worries for our customers and so we have a great range of support for the most financially vulnerable customers and we've also made some changes to make the access for that much easier. This year we've invested £127 million to support 330,000 customers already. And across the AMP, we're committed to spending £575 million to support customers. And that's one in six of the families in our region. We don't just wait for customers to reach out to us if they're worried. We also are working hard to identify those customers who are likely to need that support and then proactively reach them and even passport them to support without them needing to do anything. So that's great. But it's not just about help with the bill. We're also really keen to help customers reduce their bill. And we know for a fact that many can save money by moving to a MISA. So we're encouraging more to make the switch, and we really hope that that's a way to make bill rises more palatable.

Brilliant. Thank you, Jude. Thank you, Pav. That answer your question? Good. Yeah, all clear. Thank you. Thank you very much. Good morning, Dominic.

Good morning. Good morning, James, and congratulations on your first set of results. Thank you. I'm going to ask three questions, if that's okay. The first one is on CMEX, which I don't think you've mentioned much in your ODIs, but it's clearly for customer experience. We've only got a 28 million pound penalty this year. Could you explain why customers are not experiencing or not coming across as enjoying the experience of being with Southern Trent and what you're going to do to mitigate it. Secondly, can you also confirm whether there's any expected timeline for resolution of the off-lot and the EA investigation, and whether you see outcomes more like these financial penalties, enforcement undertakings, or neither? I think we've clearly got a date for a pen on, I think, with the EA. I'm curious as to what the development is for you. And the final question is, you're always looking very high clearly been driven by inflation. Do you think that if we have another year of high inflation, which looks likely, and another year of very high roaring next year as well, that there's going to be some form of debate, similar to Ofgem, where we're going to end up with a sort of a real phenomenal switch at all potentially coming into the world sector?

Okay, brilliant. Thank you very much indeed, Dominic. So I'll cover off the first two and then perhaps let Helen explain the inflationary impact on Rory and how we see that playing forward. So first of all, CMEX, I think you're absolutely right to call it out. CMEX has been a measure that we haven't performed well enough on. But if you look at our ODI performance, ODIs are actually a key driver of the service that customers, the vast majority of our customers receive on a day-to-day basis. And well over 90% of our customers have no need to contact us because they enjoy that level of service, as we've seen with the £73 million worth of outperformance that we've delivered over this last 12-month period. So the vast majority of our customers receive brilliant service every single day. We do see an opportunity to improve, though, but it's not just about CMEX. Now, I've just completed 70 roadshows around the business, and my key priority to the organisation has really been how do we make ourselves just a bit more customer-centric? We've got such a strong performance-driven culture. How do we make sure that that is really focused on giving customers the best possible service each and every single day? So that's been the theme of the roadshows, and that's really starting to make a tangible difference within the business. But as I say, it's not just about improving CMEX. What it's about is how do we resolve failure, prevent failure happening, and also at the same time make ourselves more efficient. Now, due to can talk wax lyrical about the sort of stuff that we're doing from a Kraken perspective. I'll hand over to Jude in a moment. But we're also doing lots on the operational side to really continue to improve that service. And again, I'll hand over to Steph in a second. So all that is resulting in a much more customer-centric organisation that ultimately will deliver for all customers. Now, I'll hand over to Jude who can just cover up the improvements we've been seeing from Kraken.

Hi, Dominic. I guess the Kraken implementation has enabled us to replace an aging asset with a modern and secure CRM platform, and that already includes embedded AI. And the implementation completed with really great transaction integrity, and what that simply means is that we've managed to do that without any bumps to revenue or cash collection, which is good news. But you're right. Right now we are turning our full attention to harnessing the power of Kraken to deliver octopus-type customer service experience, Our portal has just been to a complete refresh, and our customers will see more improvement on key journeys, things like metering and house moves, and that's really helping to remove friction and reduce customer effort. So all in all, it's been a great partnership, but we're going to continue to benefit from Kraken right through AMP 8 and AMP 9.

Brilliant. Thank you, June. And Steph will cover off what we're doing on the operational side, particularly in waste.

Yeah, absolutely. So on water and waste, we know that 90% of the customers that have to contact us have a really good experience. We also know that when we send an engineer, customers really enjoy that. But there are absolutely some areas that we can improve. We've got a new campaign called One Call is All It Takes, and we're focusing on three things. So the first thing is response times, particularly on floodings. We've already improved that by 80%, but we've still got more to do in that space. The second is around when we need to do follow-on work. We need to involve our customers more. So I think in the past we've assumed that we'll just crack on with doing some civils and we don't need to tell the customer about it, but we know now that we need to. And the third is around KCI. I think customers' expectations have changed a lot in that space. We've been doing the basics and we need to do a lot more around that. So I'm really confident now. We know the right things to tackle. We've got the right people. We've got the right measures. And we're already starting to see some of our internal measures move in the right direction.

And for those that don't know what the acronym KTI means, it's keeping customers informed. So just to bring a bit of color to that. Now, in terms of the AFWA and EA investigations and the outturns of those, truth be told, Dominic, we are continuing discussions with AFWA and the EA, and we are just awaiting answers. what the outcomes might be. We haven't got any timescales for those, so we will just bide our time and see what comes out of those investigations going forward. And I'll perhaps hand over to Helen now to cover inflation impact on Rory.

Hi, Dominic. Good to see you. Yeah, I mean, you're right. We have benefited from inflation being higher than the FD in our financing costs, but we shouldn't assume that it's all down to inflation. You know, the fact that we don't tie ourselves to the off-what notional company structure in terms of gearing is a benefit. The fact that we've got a lower, one of the lowest index link debt in the sector also gives us a benefit. That's been a purposeful strategy of ours for a long time and we see that it benefits us. On your point about the off-gem sort of semi-nominal thing. I mean, it's not something that I've seen is on the agenda, so it is hypothetical, but we have looked at the off-gem approach, and, you know, it's not something that concerns us, so there are upsides and downsides with that model. So, you know, if it happened, then that would be, that wouldn't be a problem for us.

Brilliant. Does that answer your questions, Dominic? Thank you very much, Dee. Good morning, Mark.

Hey, thank you. Thank you, James, for taking my questions. My first one, I guess, would be more for Shane, just on, you know, can you clarify where we are on receiving imperia remuneration for the 600 million and potentially more in future years? As I understand it, Ofwat's opening position is, no, it has to be funded by companies until 2030. But there are discussions with government and Ofwat to try to put through some bill rises, late reviews. So can you talk about what you're assuming and where you see that debate going? Secondly, a question for Helen, just on capitalized interest. Of course, as you ramp up CapEx, capitalized interest comes through. It's an accounting, not a regulatory construct. But can you remind us what you're capitalizing the interest at? Presumably it's the marginal cost of debt and how that credit to the P&L is expected to progress and whether that drives some of the earnings growth over the coming years. couple of years. Thank you.

Brilliant. Thank you, Mark. Shane? Yep. Good. So for those of you not familiar with this, so the default position for reopeners is that the revenue adjustment will occur at the end of the amp. However, if I move growth to one side, for the asset health business cases, you can have in-period funding. However, to get in-period funding, you've got to do a couple of things. First, you've got to undertake customer research, and that's really about understanding, do they support the bill increase now, or would they prefer to have it at the end? So we engaged with 2,150 customers and they over three quarters supported our proposals and found them either affordable or neutral. And that three quarters of support included our ODI outperformance as well. So we gave them a forecast of ODI outperformance, inflation and the re-openers. So we have a really strong position there and it adds about £8 to the bill by 2030. And you've also got to be on track with your delivery program. And as we've spoken about in our results, we're not only on track, we're exceeding it, which is why we've got positive PCD performance. So those factors combined gives us the means for getting the in-period funding. The one exception is growth. So for your year two element of growth, there will be no in-period funding. But Ofwat is going to consult on it next year for years three, four and five. So for the circa $60 million that we've got now, what we spend next year wouldn't get the in-period, but the spend thereafter would get in-period funding. So we'll be engaged with Ofwat through that process. But yeah, we've met the conditions for in-period funding. Brilliant. Thank you, Shane. Helen?

Hi, Mark. Good to see you. Yeah, I think uncapitalised interests, I know others have made some accounting policy changes. None of our earnings growth comes from accounting policy changes. They are as they have always been. But having said that, it will change in capital investment and of our capital investment growth relative to our operating costs.

you'll you'll see a shift but our underlying policies have not changed really happy with those that mark yeah yeah sure i'll come back to you thank you thank you very much indeed good morning james how are you hey friends thanks for taking our questions and for the presentation i also have three questions okay hopefully that's okay the first one um Obviously there's been quite a lot of volatility in share prices in the sector over the last few days on the back of prospects of Andy Burnham standing for the PM role. It's a bit of a sensitive topic to talk about but he's been talking about taking government control or greater government control and sometimes that's been written up as nationalisation and I don't think that's the language he's specifically used but I was wondering whether you could just share your thoughts I don't know if you've had any contact with him or his team as to kind of what you think he might be thinking and how that affects you that's the first question the second is on the ODIs you mentioned that have been a stronger than expected start on ODIs and also you've got new targets on operating cost savings so I guess the obvious question is kind of why didn't you increase your cost period 300 million target for outperformance given everything seems to be going much better than expected or is certainly somewhat better than expected second question and then thirdly on the ROE I get that you want to kind of follow the off the methodology but I was just wondering on your thoughts on this tax slab of the Rory it's quite material and as I understand it it wouldn't be very likely to be actual genuine economic outperformance given that off what sets the tax allowance in your revenues in line with the expectations for cash tax. So assuming it continues to do that, you wouldn't actually be generating any tax outperformance. So should we be kind of stripping that out if we want to look at the kind of underlying economic performance? Thank you.

Brilliant. Thank you, James. Getting into the meaty questions there. So I will hand over to Helen after I've covered off the first two to talk about your words, the tax slab on Rory. Now, from a political perspective, I mean, let's be quite frank. There's a long way to go. And we've learned over the years that politics can be really noisy. What we are focused on and we remain focused on is a company that delivers for its customers, for the environment, and, of course, for its shareholders. Now, The words that you spoke about from Andy Burnham's perspective, I think his quote was, better or more public control and well-run companies for public good. And to be quite frank, that aligns absolutely with the values of Severn Trent. We are a company that prides ourselves on being a well-run organisation and you will see from all the work we do outside of just providing water and wastewater services, that public good is really front and centre of everything that we try and do each and every single day. So we're well on board with that. I think in terms of the direction of travel, we saw that the King's Speech, I've already referred to it, was referenced last week and that sort of cemented the direction of travel in my mind in terms of we're heading for a new independent regulator. and what what the whole purpose of it is to again ensure that we've got well-run companies that are financeable and can deliver and support the long-term growth trajectory of the uk so that is is where and how we remain from that perspective in terms of the odis i think i think it's a really good question obviously we are delighted with the 73 million unbelievable performance across the business a testament to again this really engaged and highly performance driven culture that we've got in the organization we will continue push the boundaries wherever we can. Now, as Steph alluded to earlier, just by staying still, there will be a £20 million reduction on our ODIs. The target's ratchet up each and every year. So the fact that we've committed to at least £50 million in nominal terms, I think is testament again to the culture and the ambition inside the company. We are in year one of a five-year regulatory period. So, you know, we're not going to be bold enough to say the £300 million is up for an upgrade yet. But we also have to take into account the fact that things have moved. The Environment Agency have changed the classification of pollutions. And, of course, we're waiting to see how off what may then flow that through from an ODI perspective as well. So all of that is uncertain. So where we are, we're really confident with what we're committed to and look forward to delivering again next year. And now I'll hand over to Helen to discuss tax on Rory.

Thanks, James. Hi, James. Good to see you. Great question. I think it's, yeah, I think it's a great question and we've had that debate ourselves internally. I think if I think about the returns that we're delivering, you know, hopefully you will have seen the presentation and we've got this track record of consistently delivering above base return and those double digit returns that you can see this year and in previous amps. Obviously, our ODI performance is leading. We've delivered so much outperformance from that. We've also got the 30 bits from our outstanding plan, which we get on our whole 15 billion that we secured in the FD. And, of course, in financing as well, benefiting from both our capital structure, but also the fact that we've got tight spreads and a really high demand for our debt. And so all of those multiple levers that we've got to outperform, we see that continuing. In terms of the tax, you know, we want to be consistent with what you'll see in the APR and the measure that you'll see through the APRs that we will give to Ofwat. But it's not our focus. It's just, it is a function of the maths. our focus is on all of the other things that are driving those double-digit returns.

Brilliant. Happy with that, James? Thank you very much indeed. Yeah, thank you. Thank you. Good morning, Alex. How are you?

Morning. Well, thank you. Hope you're all well as well. Two from me, please. Just one is a little bit of a follow-up on the ODI point from James's question. Just in terms of what you were saying about the $20 million charge for standing still, can you just clarify, is that from where you out-turned on ADIs or where you thought you were going to out-turn when you set the original guidance? I'm just trying to understand whether the performance that you've done in year one is giving you some carry into next year in terms of underpinning that at least $50 million. And then my second question is just on the $150 million of cost efficiencies that $36 million in FY26. I guess two parts to this. One is is it fair to assume a relatively linear run rate on those cost efficiencies to 2030? And then secondly, just on where the easy wins are and what might be more challenging. Thank you.

Brilliant. Thank you very much indeed, Alex. So I will cover off the ODI piece. I'll give you a bit of an overview in terms of the efficiencies. And then I'm going to hand to Steph to talk about how we're using AI, particularly in her space. And then we might hear from Bob as well in terms of some of the innovations that will also contribute to those efficiencies. So first and foremost, on the ODIs, I probably wasn't very clear. So in terms of what I meant was, from an ODI perspective the targets ramp up each and every year so if you stand still effectively you don't outperform to the same degree so even if we deliver the same level of performance as we have this year effectively our ODI outperformance would be 20 million pounds lower so by setting our guidance what we're effectively committing to is everything's basically being reset we're committed to delivering that 40 million pounds sorry 50 million pounds in nominal terms outperformance against the backdrop of a particular change in pollution. So that's where we are from that perspective. In terms of the efficiencies, I spoke earlier about the customer centricity we're going to drive in the business. That will obviously lead to a real attack on failure that we do sometimes see. Not obviously for the vast majority of our customers, but when we do get it wrong. By addressing that failure, we will actually start to deliver some real cost reductions as well around the cost of failure. So we're looking forward to seeing that come through in the business. But we are really committed on the artificial intelligence journey, and that is well embedded in the organization. We've seen some exciting stuff already, and there's a lot more to go out. And I'll hand over to Steph to cover some of that first.

Yeah, fantastic. So we've got loads of insight about our water network. But when we insourced our waste networks team two and a half years ago, we realised there was a huge opportunity on waste. So we've put a thousand more sensors in the network and we've really embraced Storm Harvester. So our control centre here in Coventry uses the data across the network, across rising mains and pumping stations to predict and proactively attend before things happen. So that means that we can get to problems before they impact on customers, but also before they become too costly. So we don't have to put reactive measures in place. We're ahead of the game, and we've got teams dedicated to go and fixing those things before they actually cause a problem.

Brilliant. Thank you, Steph. And then I'll let Bob in a second talk about some of the things that he's seen from an innovation perspective. But let's not also forget... that we're delivering £500 million worth of capital efficiencies. So after Bob's covered it, I'll hand to Paul Baxter, who will cover off some of the stuff that we're doing from a capital delivery perspective also.

So, Bob. Great. So I'm going to talk about a couple of AI examples. So the first one is actually around how we predict the weather using AI at the moment, which actually is really helpful in us using our cheapest sources of water. So, for example, last summer we were able to deploy the cheapest sources from some of our gravity-fed areas rather than the pump sources. That's a big efficiency win. Another area I'm looking at is sewage pumping stations efficiencies. We've got over 200 installations live now using machine learning, which optimise how pumping stations work together and optimise pump curves. So that's a brilliant example of that. Brilliant.

Thank you very much indeed, Bob. And Paul, would you share some of the stuff you're doing in capital delivery?

Yeah, thanks, James. So we're covering a whole range of opportunities in capital delivery to deliver that £500 million. But if I just take on the theme of AI and just take that a little bit further... An example of the sorts of things we're doing with AI is we've got a number of cross-country pipelines that are being delivered this Amp, so big pipes over long distances and we're using AI to do route selection in order to, so AI can do thousands and thousands of options on route selection and things that would take months can be done in hours literally now and would take a lot of time out of the design process and the route selection is to try and avoid things like canals and motorways and all of the other things that make delivery of cross-country pipelines expensive. Brilliant. Happy with that, Alex?

That's great. Thank you.

Thank you very much indeed. Dominic, is that legacy or have you got some more questions?

Hi there. Yeah, no, I've got a couple more. Sorry, you can't get rid of me there. That's okay. Two questions. Firstly, could you just – you've mentioned it a couple of times – in his presentation about the change in EPA scores going forward, but you had two serious incidents through 2025, two serious pollution incidents. Do you think that on how it's currently panning out that you'll still be able to maintain the top sort of score? And I know that Liv was going to be upset that you might have been a five-star CEO rather than a four-star CEO, but... whether or not you'll be able to maintain sort of the top score. And secondly, looking at your re-opener again, and one of the major sort of growth themes that we see in the water sector is water resources, and you talk about population growth and climate change. But is there nothing in your submission sort of pre-feed, very big sort of DPC type, Do you have any sort of lined up or is this going to be year two, year three type projects? Thank you.

Okay, brilliant. So I'll cover off some of your EPA question and I'll perhaps hand to Steph to give a bit of colour on our pollutions aspiration, how we're really going after that as a measure. And then from a re-opener perspective, I will give you a bit of colour on our new treatment works, which we've opened. And Pat Shane could share some of his views on where we're going from a water resource perspective. So first of all, we are genuinely delighted to be on course. We're highly confident to achieve EPA fourth star for a seventh consecutive year. For context, the next best company in the sector did it three years in a row, ten years ago. So we have continually the highest level of performance which we are absolutely delighted about. Now let's not forget that EPA is a number of key metrics. There are six metrics for 2025 and effectively you have to perform well against all of those metrics. One of those metrics is overall solutions and one of those metrics is serious solutions. And we've enjoyed a 35% improvement in our pollution performance due to some great work across operational themes, but also some of the key investments that we've been making across some of our key assets, such as pumping stations. So we're delighted with that. But from a serious pollution perspective, serious pollution is effectively a function of duration, length, and impact. And our whole plan is really focused on, first of all, how do we prevent things happening? When things do start to go wrong, how we catch them early so we can proactively intervene and prevent it happening in the first place. And then when things do happen, how we respond even better than we currently do to mitigate any potential impact. Steph can share some of those thoughts.

Yeah, fantastic. Thank you. So in terms of preventing, so we've invested more in proactive work on our network, particularly planned cleansing, which means that we have fewer pollutions related to blockages. I've also mentioned all of the sensors that we've got on our network too, which means that our new waste OCC, Operational Control Centre, that operates 24-7, can respond faster. And we've also invested in a fantastic pollution response team who work around the clock to go and prevent and mitigate pollutions when they do happen. We know that every serious pollution is one too many. We review, myself personally and the waste team, every pollution that we have in order to learn from that, improve our processes, work out what we need to do differently, but more importantly, make sure that that pollution never happens again.

Brilliant. And in terms of the water resources question, Dominic, so we have just, or we will be commissioning, or we are in the middle of commissioning, sorry, our newest water treatment worker. I think it might even be the newest water treatment worker in the U.K., at a site in Derby, which will give us an additional 89 million litres of water each and every day at peak. So that will be available for us in the summer should we need it and will obviously be a key asset for us going forward in the future. On top of that, you will have heard and we've talked previously about strategic resource options and that sort of stuff is still continuing in the background. But I'll hand over to Shane now to share some of our thoughts for PI3-9 and beyond.

Yeah, so you're right to focus on water resources. So we will have roughly a quarter of a million new houses every five years. That's a city the size of Wausau connected to our network. We've also got a program called Environmental Destination where we need to reduce groundwater abstractions, so that means we're going to have to replace about 20% of our water sources. So we do have a lot of investment required on water resources. I think where you go though from a regulatory process is we've got RAPID, so that was the EA off what DWI process set up to fund water resources. So we have three large new schemes going through that process. So it's not through the re-openers, it's through a slightly different process. And we've got a scheme working with the Canal and Rivers Trust on one of our big water resource options. We've got one with the Mining Remediation Authority to take, because they've got excess water, so we obviously want to take it. And we've got one in South Yorkshire as well. And if we need more water resources, we can go through the rapid process. I think from a re-opener perspective, the one avenue where you could get more water resources is through mains renewal. So obviously we're ahead of our target. And so in round two, you can go after, you can put in a proposal for more mains renewal. And obviously that has a longer-term leakage benefit. Brilliant. Happy, Dominic.

Thank you very much indeed. Julius, obviously Dominic set the trend now for Pete to come back and ask another question. Over to you, please.

Sorry to be a pain, but I think the two things, just the first one was I think my previous question on equity, there was some background noise. And apparently it was not just for me. I got some feedback from investors as well. So if you could maybe just repeat the message that you put out, just to be absolutely sure. And then I was thinking, well, you know, I'll raise my head again. I can ask another question. So I was just wondering, the BAS 260P guidance now that you put out, How dependent is that on inflation normalizing over the years? I mean, I know you have your inflation assumptions going forward, but if inflation would stay at the current levels, would you still be comfortable of reaching that? Thank you.

That's the last question. Okay. Thank you, Julius. I'll cover the equity question again, and then I will hand over to Helen. So equity, I said before that effectively we raised equity prior to Ampe. We were very clear from the off. that that would see it through to 2030 and that position hasn't changed now over the years we've been able to outperform from an efficiency perspective i mean paul talked about some of the work he's doing within capital delivery and which is leading to 500 million pound efficiency and but also the work that we've done through odi delivery over all the years we've delivered half a billion pounds worth of odi benefits since 2021 all that performance gives us real choices so as it stands we are not going and we are well we are not raising any further equity for this period at all. So, that is clear. I hope that's clear, despite me stumbling, but that is clear. And then in terms of the guidance, I'll just hand over to Helen.

Yeah. Hi, Julius, again. Yeah, I mean, you know, I've probably said before, we're always cautious and prudent with our inflation views. So, we look at a number of indices. So... Yeah, and I wouldn't put something into the market that I wasn't confident of delivering in any scenario. So, yeah, you can rest assured that we've looked at that hard and are confident with the earnings. And you'll also notice that it's at least 250.

Brilliant.

Thanks.

Very, very clear. Thank you, Julius, and I appreciate you picking up that answer. equity question wasn't necessarily heard first time around. So thank you for doing that. Much appreciated. Right, I think that is all the questions. Right, I just want to say a huge thank you to everybody that's dialed in. I appreciate all the questions and thank you to all of the 7Trent team as well. Much appreciated and look forward to seeing you all soon on Roadshows. Thank you very much.