Good morning, everyone. I'm Liv Garfield, Chief Executive of Severn Trent, and I've got with me Helen Miles, CFO of Severn Trent, and all of the senior team, actually, from Severn Trent. So we're looking forward to answering any questions that you might have. Now, Sarah, you are super speedy this morning. You've got your hand straight in the air, so we get to be super efficient and go straight to yourself.
Thank you very much, and good morning from a very grim-looking London outside. I have two questions, please, and to start with, I actually have a culture-centered question around ODIs. So if we assume a more challenging ODI framework going forward-
This meeting is being archived.
I'm curious what it is within the fabric of Severn Trent that gives you confidence in maintaining that incredibly strong competitive position and outperformance that you currently have? And then secondly, Liv, could we please get an update as to what's on your current happy list and your current worry list, and how has that evolved since, say, mid last year? Thank you.
Oh, good questions. Right, I'm not sure I can give you, I can unveil to you the total happy and worry list, but I'll give you a couple. So I think you're right, I think ODIs, they are cultural, so I think in Severn Trent it is built into the fabric of the organization, and I think this year was hard. So this year I think, everyone has been clear about that, that, you know, weather wasn't necessarily with us, but it is our job to manage it. And there's quite a lot of measures, and you have some risk across quite a range of measures, and I think what we tend to find is that you need to spread the activity across a lot of teams.
If you're kind of, like, overly centered on one particular metric, and that's why we quite like the fact that in the next AMP, you've got 21 measures, they're common across the piece, you're clear on them now, so we've been working on them shadow reporting for some time. But to kind of bring to detail the some of the, the kind of like sense around it, I'll ask Jude to talk about voids and... Oh, my goodness, oh, my God, yeah, definitely.
So Jude will talk about her two big ones this year, which is metering and voids, and then I'll ask Steph talk about, there's probably four in Steph's area that have had particularly large numbers, and I think we'll bring out to life the cultural part of what do we do differently on those, and then I'll do my happy and worry list. Jude?
Yeah, absolutely. So, with meters, it's easy in the sense that we're really clear on the benefits that metering gives us, so accurate billing and leakage detection. So, when we needed to, we were able to accelerate. We have good relationships with our third parties. We have a really motivated team. We press the button, and off we went and increased our velocity effectively. For voids, we learned a lot from last year, actually. We worked really hard using data to try and identify properties that were consuming, but not being billed. And we ironed out all of the kind of issues with that process, and it meant that this year that's just gone, we were able to have more smooth glide path and achieve greater volumes.
And Steph?
Yeah, so we've done really well this year on low pressure, biodiversity, blockages, public sewer floodings, and I think as with Jude, all of those measures relatable to the customer, so we're really passionate about doing the right thing. We also have this great structure in Severn Trent, where we use Comm Cells, so we have top to bottom measures, so we're all looking at the same things all of the time, regardless of the level of the organization.
In terms of what's on the happy and the worry list, well, I guess I'll only give you two insights, because that obviously is the magic juice of what we're all focused on. One thing has switched in the last week: we've been doing a lot of work behind the scenes on spills, and we know that it's the single biggest topic in the sector, and it's been on our worry list for some time. Actually, we're so pleased with the investment that we announced last week, but that's because we've done so much work behind the scenes to get ourselves in great shape on what the solutions would be.
So actually, for me, while I guess we are obviously still massively focused on the performance targets, and there's still a lot of work to be done, in terms of what I think we've now got a genuinely game-changing plan that is gonna deliver accelerated performance on spills reduction, I really, really do. So that has moved from being on the worry list of, what are we gonna do on spills, to being actually, we've just got to execute the plan now. That's our forte. That's what we love, is when we've got a clear plan, and it's bold, and it's literally amazingly ambitious. That's when we get really excited, so that feels like it's moved. And then the second thing, I suppose, is on the kind of like, you know, the list of is it happy or not, is just getting ready for the Draft Determination.
For us, it's on the happy list because we're three weeks today, we get that Draft Determination document. So I guess for reg geeks like myself and Shane, we just can't wait to get the thousands of pages, crawl through it, and begin to work out, "Okay, what's as we thought? What's different?" And we feel like we're in good shape as an organization for the kind of, like, the next phase of the journey. We wanna be able to affirm that to our teams, so I suppose that's also on the happy list, is that we've got hardly any time left to wait. Good, so Dominic's next up.
Hi. Can you hear me okay? I can't hear you now, bizarrely.
Oh.
Oh, okay.
Sorry. Oh, good.
Yeah. Oh, there we go. Oh, thank you. Yeah, got sort of three questions, please, if that's okay. The first one is on your dividend policy, and clearly you had a GBP 2 million fine in February from the EA, I believe, and the letter, I think from Iain Coucher, was sent around the water industry, basically saying you should be linking dividends to environmental performance and other sorts of performance. Is it possible for you to shed some color as to... I said I had three questions, and this, this first one's got three parts by the look of it.
What actually is in the letter, why you didn't cut your dividend by GBP 2 million, and what would it take to do so, or what would you need to see before you do link the two? And then, the second question is on, have you seen an increase in your cost of debt at all on the back of Thames Water contagion, at all? And actually, that would do, otherwise I've got to ask you four questions, and that's probably too many.
Very good. Okay, let's do them in that order then. So, so on dividends, I'll get Shane to run through how Ofwat thinks about dividends. There's quite a lot of detail in the PR24 documentation, and then I'll link to, I guess, the element of performance in the round. So Shane?
Yeah, so Ofwat's always been very clear on the importance of dividends. So I guess the first point is that if you compare and contrast the PR24 methodology and the PR19 methodology, if you had a notional financial ability constraint, Ofwat would zero out your dividend to solve that. At PR24, they set it at 50% of the base dividend yield. So that's the first point. The second point, and this comes through in the new license condition and the letter from Iain Coucher, which is-
... companies need to do a much better job at explaining how the dividend relates to performance over time, which Liv can pick up.
Yes, so effectively, you're talking about performance in the round and performance over time, and that is a conversation that has always been an active conversation at the board from a Severn Trent perspective. But I think it's fair that we could do a probably an even better job of articulating that, and you'll see that in this year's annual report in terms of the ARA documentation, us beginning to flesh out more detail of those conversations behind the scenes. The types of things that we talk about is, first of all, environmental performance. So we are four-star for the last four years, and we are really proud of that. Nobody else has achieved that, and we're highly confident of being four-star again for this year. That will make it five years on the bounce.
That's seven very complex, very stretchy measures that we've done well against over a long period of time, and that's the over time and in the round part. Also linked to the environment, you've got Green Recovery, you've got Biodiversity, you've got our contribution to a whole range of activities there, including net zero. We're the only company globally to have invested in treatment processes around carbon neutrality at, at our waste works in Strongford. So there's a whole heap of good evidence, we think, on the environmental part, and we acknowledge that, you know, any pollution is one pollution too many, and so we do look very carefully at any pollution performance over that period of time as well as part of that factoring in. We then look at two other parts, I guess, well, three other parts, actually.
We look at our finance ability, and we've got an excellent performance there. Obviously, investors really supported us last year with the equity raise, so we look at all of the financial metrics, and Ofwat judges that very carefully, and they are pioneering, if you remember, as to who they think are financial leaders in that kind of financial resilience, and they've chosen us as being sector leader for the last few years. The next thing we look at is we look at wider operational performance. And, you know, we're 76% green. We're the sector leader on ODIs for the first four years of the AMP, and we've just announcing targets today that feel pretty punchy for year five.
So we look at all of that performance, and again, over the round, and we look at some of the big determining measures there, like leakage and things like that, which we know are particularly strong metrics in our sector. We take a strong look at those. And having looked at all of those things, we then kind of say, "Okay, across the piece," you know, and this is one of the things that Ofwat has kind of guided as well, "look at the culture in the organization, look at the people dynamics, look at whether you're doing the right thing for society." We've got some really good things that we're doing there in terms of our societal strategy, our engagement scores, and what we've committed to our communities, and we actually help a lot of customers out with affordability, so we worry about all those things.
So it's a very, very detailed process that goes through it. So we are confident that we've got the right dividend policy, and we are confident that in the round, we're performing very strongly against that, and that's the articulation that you'll see come out. And so I don't think I can answer your last question, because it's not a one-off moment. What the letter says and what the license conditions say, and also what the kind of like, the kind of whole methodology says, is you must look at things in the round, and you must take a very balanced, considered decision as a board, and to make that judgment off the back of that over time, and that's the way that we view it.
As I said, I think it is fair we can do a better job of articulating it, and we will articulate it in quite a bit more detail than we've ever done that before. Now, then, over to Helen, I guess, for the second part of the question.
Brilliant. Thanks, Dominic. I guess start with the big picture first. I'm really comfortable with where we are in terms of our ability to raise the debt we need for the rest of this AMP and moving into AMP8, where we need to raise over GBP 1 billion a year. And I'm really confident about our ability to perform well in terms of the rates that we use. We're very well-placed relative to the rest of the sector in terms of our cost of debt, so that's probably the big picture. On the specifics around around Thames, I'm really pleased when you look at us, our performance over the AMP, we have outperformed the iBoxx for the AMP. There's no doubt that's got tougher in the last year. We're certainly not seeing any halo impact in the sector, but...
and you'll see our cash cost of interest has gone up marginally year- on- year. But of course, that does get trued up. If we don't meet the iBoxx, it gets trued up, so we do have that protection. So overall, I'm very comfortable with where we are, and we sit well placed for AMP8.
Have you actually seen your spread widen at all or not?
It's actually tightened in the last few weeks. So,
It moves, doesn't it?
Last year, it moves. Last year, we definitely saw an impact last summer. That's tightened over since subsequently to that.
It moves around, I think, is the honest answer, right? Depends on the day you go in the market.
Yeah.
Depends what the tenor is. It depends where you go, in which area.
Yeah.
So, Helen and Nathan do a good job of making sure we go in on the right day, for the right tenor, with the right people.
Yeah.
So ours to manage.
Thank you very much.
Good.
Thank you. Okay, Mark, we can see you now.
Oh, we can't hear you, Mark.
No, we can't hear you, Mark.
Let me unmute myself.
That's perfect.
Thank you. Hey, so listen, a question regarding CapEx. CapEx was, I think, a little bit higher than you had guided for. The anecdotes that I'm hearing is that, you know, some of the contractors are really putting up their prices. You really do have to pay to get third-party labor onto your network. So I was wondering how much of the CapEx numbers that you're, or the guidance that you're putting out, how much of that is inflation in prices, and how much of that is quantum of work?
So good, I'm glad that we've got that rumor out there straightaway. So we've guided today to about 1% overspend over the AMP. We'd previously guided to 0.7, and all of that was energy. So it's a tiny movement, and it's not related to contractors and inflation, actually. That's ours to manage. We're not saying that we haven't seen some of that occur in some contracts. We're just saying that actually, you can make efficiencies elsewhere to offset that. This is choice spend about getting ready for the next AMP. So, so I guess I'll do two things. I'll hand to James, just talk about how we manage work closely with contract partners. I mean, and also, just to remind you, we've got quite a different capital setup to others. We're heavily in-sourced. We do quite a lot of the work ourselves.
We design the work ourselves. So I'll get James to run you through that, have a wider base than other people, and then I'll get Helen just to bring to life a couple of the areas that we are choosing to proactively spend money on, which is part of that guidance, and it's about getting ready for the next AMP. We're within three weeks of the draft determination. We're within a matter of months of going live. We can see the important priority areas. We wanna get ahead of the curve and make sure that we're still a really strong outperformer. That's what the guidance is about. But James?
Thank you, Mark.
...When you look at what we've been doing in the past, we, we've spent a lot of time and energy in insourcing, as Liv refers to, a lot of our activity, particularly in the design space. Now, what we've been doing in the last couple of years is really enhancing the productivity of those design teams. So, for instance, we've brought in a lot of digitalization to improve our design rates. So designers now can design quite complex systems in a very short period, a fraction of the time that they, they did previously, and we're on a great journey in that particular space.
Also investing in Plug and Play, which is effectively a platform-type solution, so we'll be able to reduce our time to deliver, reduce our design times as well in that, in that particular area, and that will improve, again, productivity from a delivery perspective. So that's what we're doing internally to drive productivity. We're also translating that into how we work with the supply chain. So we've given our supply chain lots of visibility of our AMP8 program. We're already moving ahead with that, and we've announced the GBP 450 million worth of Transition Spend to make sure we're on the right run rate. And we've also extended our frameworks to the end of year two of AMP8, and within that, we are gonna contract...
Our aim is to contract the bulk of our AMP8 program by that period of time, so effectively securing that resource. We are getting a lot of positive feedback from the supply chain about how visible our program is and how we're already stepping into that space, which is really positive. So I think there's lots of goodness within the work that we're doing to not only continue driving efficiencies, but also ensure we deliver this sizable program in AMP8.
Helen, do you want to give a couple of examples of where we are choosing to spend a bit of extra money?
Yes, we are really clear that we want to invest early in getting ready for AMP8, and we will invest in things which drive a return for us, whether that's financially and, or through operational performance. Two of the areas I'd call out, you'll remember from our Capital Markets Day, we are investing heavily in Plug and Play, which is a different way to deliver assets for our capital program. We're expanding that. It's going so well, and James and the team are doing such an amazing job, that we're expanding that, and we're gonna do more asset types. So we want to invest in that so we can get off to a running start at the beginning of AMP8.
And then the other thing that we're investing in is, in, we're expanding our waste capability with an Incident Response Team, so that when we get weather, if that were ever to happen, we've got the tankers ourselves, we've got drivers ourselves, and we can respond really quickly to that, and that will drive the performance in the waste business.
Very good. Thank you very much. Okay, over to Bartek now, if that's okay?
Hello, good morning. Can you hear me well?
We can perfectly.
Okay, I suspect you cannot see me, because somehow the camera doesn't work. So let me deal with without that. I would like to ask you about CapEx in 2024, so continuing on Mark's questions.
Yes.
Because the previous guidance was GBP 1 billion, effectively, you spent GBP 1.2 billion. So is this GBP 200 million in TotEx overspend, or there is something else? And then if we go into this, I guess 50% would be shared with customers, but you're talking about maybe getting another returns later on. I mean, so what was the reason for overinvesting in particular in FY 2024? Meaning, will it improve your future, future performance, or was it impacted by, by weather or something else? Because this, you are the second company which is actually reporting additional CapEx in FY 2024, above whatever has been guided.
Secondly, on the ODIs, if maybe we can go into details between this GBP 100 million and GBP 60 million you are guiding on ODIs for FY 2025. How precisely does it work, and what are the moving parts between GBP 100 million and GBP 60 million for 2025? Thank you.
Perfect. Two good questions. So let's hit the first one quite simply. So we're not giving... So I guess I think the implication from your question, Bartek, is almost like we said at least GBP 1 billion for this year, and we landed at 1.2. Is that an overspend? It's not an overspend. So the guidance we previously said is we were gonna be 0.7% RoRE overspent on capital over the five years. We've today made that, you know, a whole 1%, so tiny movement. The difference between the billion and the 1.2 is just accelerating quicker. So remember, we've got the Green Recovery Program. We got about GBP 650 million worth of spend on green recovery, and most of that was spent in years four and five.
We've made better progress in year four than we thought on some of that. We've also committed, once Ofwat changed the rules on the fact that transition spend could be done over two years, not over one year. We got going on that. There's about 50 odd million-ish that is, that is over—there's kind of like transition spend, AMP8 money we're getting ahead of. So those are the activities. So no, you should view it as good news. If we'd not spent the GBP 1.2 billion this year, we'd have had an even larger year five. So to stay within our, overall range of TotEx that we've guided to, then we have got GBP 1.3-1.5 billion in year five alone, because of the original price view was a growth price view for us.
We got a very strong price view originally last time around, and we added to that Green Recovery, and we've now added Transition Spend to that. We're just making sure that we smooth it slightly. So, so no, so I think it is a slightly different situation to how you first described it. That's the first part of the question. I'll get Helen to walk you through, I guess, how it works in terms of the guidance on ODIs.
Yeah, sure. So, as you can see, we're delighted to have guided to over GBP 100 million on ODIs for year five. That's a combination of in AMP ODIs, but also end of AMP ODIs that we've guided to previously. Now, because of the strength and the breadth of our ODI performance in year five, we do hit the caps on both water and waste. And what that means is that we share anything over and above the caps with customers. And so the sharing heavily depends on where we outperform on the ODIs, which is why we can't be... We've said around GBP 60 million post-sharing. We can't be too precise, but we estimate it will be ±10% on that number.
... Really pleased overall, in nominal terms for the AMP, we're going to be earning for at least GBP 420 million in ODIs, which is sector leading.
Mm, super. Thank you.
Very good. I think, Pav, I think it's you next.
Hi, team. Morning. Thank you for taking my questions. I've got two, please. So firstly, looking at the overspend that you guys were just talking about with biotech, is it fair to say then that that 30 basis points of RoRE that we're talking about, is some of that or all of that attributable to some of the transition spend that will therefore then you'll be made whole in AMP8? Or is some of that genuine overspend that you think you should go above and beyond your allowances in terms of then setting yourself up to be in a good position? That's my first question. And then my second question, and sorry if it's been answered already, is on this concept of uncertainty or gated mechanisms that might be featured in the draft determinations.
I was wondering if you could share any thoughts on that, and a follow-up on that in terms of enhancement spend. So I think the rationale if this were to be put into place is that Ofwat think that companies aren't spending in line with the allowances they've been given, and I've looked in the latest water company performance report, and you're in line or slightly ahead of the allowance for wholesale water, but you were behind on wholesale wastewater. Can you talk about the drivers of that, and do you expect to spend your full enhancement allowance by the end of AMP7 , and if not, why? Thanks.
Very good. Three good questions there. So I guess I'll hand to Shane in a second just to talk about, the allowances. I mean, bear in mind, the way the price reviews work is you're given an amount of money, and then it, it's an overall amount of money, and you spend against that overall amount of money on the priorities that come through. So but Shane will talk through that. In terms of the first bit on the TotEx spend, I mean, so it's not... There is transition spend, it's GBP 450 million, and we've said that, and that you do get treated up for, and that's outside of the RoRE.
And then separately to that, we are choosing today to spend 0.3% extra, and we're choosing to spend it on areas which don't count for Transition Spend, but we believe give us a fast start. And so Helen's given you two good examples, one of which is on Plug and Play. To set Plug and Play up isn't eligible Transition Spend because it's not against a named scheme. So to actually do Transition Spend, you've got to do it against a named WINEP scheme. It's got to be against a named activity that is a statutory need. This isn't against that, but there's no doubt it'll make us more effective in the next AMP. So we're choosing to spend a bit more money now to recoup extra money in the next AMP, right? So will we get it back as a team? Yes.
Do you have to be patient and wait another couple of years? Yes. You'll probably see a, an equal amount TotEx play around the other way in years two or three. Likewise, I guess the IRT is slightly different. So the investment in tankering resource for Waste East, we have a brilliant tankering support situation in water, and it's made a massive difference to the ODIs in water, and you've seen that come through with our GBP 35 million water performance on ODIs this year. We think that in order to cope with extreme weather, the changes in the metrics that are likely for the next AMP in waste, that we want to get even further ahead of the curve. So it's not something that will come back now. It's not a transition spend cost. You can't claim it.
It is an overspend against base, but we are confident it will give us better ODI performance in the next AMP on the waste metrics. So again, as Helen said, they're all conscious decisions on a business case basis, but they are a choice spend. That 0.3% is a choice spend, but we're pretty confident we can evidence next AMP, where that came back through either capital on a TotEx basis in James' area or through ODIs in Steph's area. Good.
Should I answer the question?
Yeah.
So I guess in terms of spending in line with the allowances, there's two parts, and part of your question is probably a year too early, because for PR24, Ofwat is changing the rules. But if we just go to PR19, at the moment, I think Ofwat's frustration was that companies weren't delivering the outputs or the deliverables that they got funded to do, which is not the case. So we're green, for example, on our WINEP schemes. And we have price controls, so enhancement and base is blended across that. So as long as you're delivering all your deliverables, for example, WINEP, you're in a fine situation. For PR24, though, Ofwat has flagged potentially different sharing rates for enhancement and base, so we'll find out on the twelfth of June.
So that, your point there probably has more relevance as we look to AMP8.
On the gated mechanism, it's not something that particularly has. It was something that hasn't affected us to date, and we're not sure it will affect us going forward. It's not a conversation that we've had with Ofwat, is gated mechanisms. My understanding is that if you have particularly large capital schemes, then that's when a gated mechanism might kick in, or if you've had a history of not delivering your capital program, that's when a gated mechanism might kick in. That's not true for us. We've delivered well against our capital spend. Actually, as you've seen today, GBP 1.2 billion, so we've gone up 63% year-on-year.
We're actually bang on track now for the year one number, so and we're going to go up again this year to between GBP 1.3 billion and GBP 1.5 billion. So we've got loads of evidence that deliverability is strong. You would have seen in my video earlier as well, that the main difference for us and some of the other companies in the sector is we don't typically deliver very, very large capital schemes. We sometimes have them, but they're normally, you know, we're typically hundreds of schemes under GBP 20 million quid, rather than a handful of schemes over GBP 200 million quid. And so that, again, is another difference. That's just topography of the asset base that we look after. The way that the Midlands is based, is lots of smaller towns, rather than being one or two big conurbations.
Of course, we have got Birmingham, but even then, the way we serve Birmingham is quite a lot of smaller assets. So I think for that reason, gated isn't something that we're particularly factoring in, so it's not something we're expecting to have a very significant role in our price view. Very good. Thank you very much. Right, Dominic, back to you.
Hi there. Yes, there we go. A nice purple screen by the look of it.
I was going to say, yeah, you've gone strangely... almost cosmic, I'd say.
Probably a better view, to be honest. Couple of questions from me, please. Firstly, on energy costs and your non-reg business. Clearly, we've seen a big decline in energy prices over the last few months.
Could you just remind again what your hedging strategy is for your energy costs, for your non-reg, whether we should be expecting a step down in profitability on that? And then the leading question on that is then how do you, how do you mark your medium-term energy contracts when you're selling to yourself in a way that you do it in a fair, sort of, TotEx number? I mean, you should-
Yeah.
Clearly you can shift profits from one division to another, so if you can give us a color there, that would be great.
Okay, it's not quite as, as fluid as you describe, I'm afraid. There are very strict rules. So I'll hand to Helen to talk about the both of those particular financial questions, but I think I might just ask James after that, just to bring up what we've been doing to try and drive up generation. Because you have two parts: you have the prices and the hedging, and then you have the generation. We've had an excellent year on generation, even if there is more to be done in terms of, how that flows. Helen?
Yeah, so, on our energy costs, we obviously have this fantastic position where we generate 60% of our, of our consumption, which gives us a fantastic hedge at a group level. Now, obviously, that plays differently through the reg and the non-reg in terms of RoRE, but, but overall, we're very comfortable that, we've got that natural hedge. If you look at energy prices and where we're guiding to, you can see that in the regulated business, the main consumer, we are guiding down on costs, and you're seeing that play through in the guidance we're giving on business services as energy prices come down. So that's how we look at it.
In terms of the process, there is an extremely strict process about how where we've got intercompany hedges, how we do that around the RAG 5, license condition, and we have a RAG 5 committee that agree that. And in terms of the specifics around energy pricing, we, we do that on a specific date. So we have a formal contract in place, and we, and we price on a specific date, and that's all, all locked down and reviewed through that committee, so a very robust process.
Very good, and James, generation.
So from a generation perspective within green power, there's been two focus areas, really. The first one has been around operational performance, and we've really focused on basically asset uptime. That's allowed us to really maximize the energy generation capability of the assets that we own. We've also gone through an acquisition. We've bought a company called Andigestion, and we've been able to import, for want of a better description, our strong operational performance into those particular assets and actually increase the availability of energy generation from those sites. So we've just broken our annual record. We generated 300 GWh of energy, and I'm expecting that to continue to increase during the next year when we see the full year impact of the Andigestion acquisition.
Very good. Thank you, Mr. Cosmic. Okay, John, over to you.
Hi, thanks, everybody. Morning. One question from me. I think the main thing I'm interested in is sort of what questions you've received from Ofwat, in relation to your PR 2024 plan. I think my impression is that the listed firms have probably received below average, number of questions, so any information you can give on that, and, yeah, that would be my question.
So I don't know whether I'd be able to know whether I've received below average, because I know there is a total of how many queries have been sent, but I don't know whether they've all gone to one company or whether they've all gone to, like, maybe... Do you know what I mean? So I guess we've, you know, we've been confident that everything we've received, we've been able to answer strongly. We're confident that the questions have been high quality and that we're... You know, and on the basis of the run rate, they've not been inundating us, so I guess they've been asking, you know, a good range of questions. But I couldn't give you a data point that says it's definitely average or not. Shane?
No, no, and questions are a good thing as well, I think, because it's an opportunity to make representations before the DD. So I guess there's two types of or three types of questions. There's tell us where evidence is, the other is there's an inconsistency, or the third is perhaps help us justify this position a little bit better. And so we welcome the latter queries, quite strongly, because it gives us, an upper hand on a head start, I should say, the DD.
So I don't think we know. So I, I don't know how, how meaningful it will translate, but we'll find out the June 12th, won't we? So, so I guess I'm less worried about how many questions we've had. I'm more worried about what the result is on the June 12th, but we'll find out on the twelfth of June, you know, Ofwat's perception of our plan.
Okay. Thank you.
Mark, we've got your hand up again. Is that correct?
Yep, that's me. It might be the other hand, but, Look, just on the dividend, at the time that you did the capital raise, the indications were that, you know, even at, with the allowed return at 3.2, you know, you, there was enough within that business plan for you to be able to maintain the current dividend policy. That was, that was my strong impression. Given everything that's happened since then, given head start on the CapEx scheme, rates slightly up, potentially returns slightly up, is that still the case that the dividend appears sustainable?
So, so you know this, this is my third price review, right? And so this is the third moment in time when I've sat in this chair at the point in time when you're about to get draft, and then you get it final, and people want to talk, quite rightly understand why, about the dividend policy next time around, but I'm just not in a position to comment on it. All I can say is the following: is, is that I know that what investors want is they want a progressive dividend policy. I understand that. I understand that what the regulator wants is they want people to look at performance in the round, quite rightly, and make sure that it, that all stakeholders are being fairly considered.
What we as a company want to do is to outperform, because outperforming companies should perform strongly in all of those scenarios. So we'll get the draft on the twelfth of June. We'll get the final determination, I guess, depends on the election, sometime towards Christmas. Whether it's before or after Christmas will, will depend, I guess, as to how early before Christmas it is, and we'll then be in a position to talk about the next AMP. But I guess the best that you can do as a management team is to outperform on the areas that give you control, and the areas that we have control is with a non-reg business that throws off some nice profits, that we manage carefully, and that gives us some dividend cover.
We'll be carrying over a war chest of ODIs from years four and five into the next price review. You can imagine we're going to be working our socks off this year to try and make that war chest as large as possible. We'll get ourselves in the right shape for next AMP to make sure that we can still be an outperformer on the 3 areas that are all generating. Of course, if you are also considered to be a strong business plan, then that comes with a few bits of, a little bit of extra reward as well. We'll be working hard to land all of those performances, and our in-the-round performance is really strong. We are an operationally good performer, we are a strong environmental performer, and we have got a very strong start rate in terms of our financial gearing.
I can't give you any more insight than that, but hopefully that gives you some sense of how we think about it.
... And is there anything that does keep you awake at night? There is something, 'cause everything sounds so positive. There is some-
So I've got GCSE, I've got GCSEs at the moment, and, and I guess, I've never gone through that before. So I think Latin GCSE is probably the thing most keeping me awake at night right now, is that. So I guess, you know, I'm a good sleeper, so, so no, I'm typically sound asleep. And things aren't perfect. If you look at all of our stuff that we've said across all of our RNS and all of our annual reports, it says very carefully and very clearly that we're not the finished article. So nobody around this table thinks we're anything other than, in progress. And that is the message we try to land, is that we- you're only as good as your last match. You're only as good as your last set of performance metrics.
We're clear on that as a team, and we work hard every day to make sure all of the next numbers that we report to the regulator and to yourselves will be as good as possible and will be strong in the sector. But, of course, every day starts fresh. Every year an ODI starts fresh. Every year a four-star status starts fresh, and we work hard to make sure we land that. So no, we're definitely not the finished article, but we've got a good culture in Severn Trent, and good cultures have a better chance of landing good results. Good. So I think, Michel, are you actually got a question online and a question with your hand up, is that correct?
Yes, that's correct. Thank you very much.
Brilliant! Go for it. Good morning.
Quick question. Five years ago, the sector had a tail end, so three listed companies had an outperformance and received a bonus on the business plan. They were fast-track. The other companies were told to improve, and for the past five years, they've been hammered with negative ODIs. Some of them are now failing, and you have shareholders walking away. Ofwat has to clean up the mess. There are not 10 ways to do this. At some point, you will have to ask well-performing operators to take over underperforming operators. Has this conversation started?
So, there's quite a lot of beliefs there, right? In terms of... I'm not sure I agree with the whole sentiment. So I think in any sector, whether it's food, retail, airlines, I guess you typically have some good performers and some tricky performers. And I guess if you look at performance, I would say Wessex, which are private equity-owned, they're, you know, they're not listed. You know, they have been a very good performer for a long period of time. So I'm not sure either-
Mm-hmm
... that necessarily performance does straight relate to ownership model. I'm not sure that's completely true either. I guess I think, actually, that the sector's made some really strong progress on some big areas. So, I guess I'm not sure I agree with your premise. I think specifically you're saying, though, is where do we think the future goes from here? And what we think for us, is that we need to get a Draft Determination. We've got more investment than ever before in the next few years. We need to get ourselves in the best shape to deliver that, and that's literally all we're focused on. We are solely focused on our task, our company, and making sure that we deliver well in the Midlands.
Thank you.
Very good. I think that was the last question. So... Oh, no, we've got another one. No, it says no questions. So, so now I think we'll give it literally two seconds just to see if somebody rapidly puts their hand up in the air, and if not, then we'll call it. So thank you very much to those dialing in and giving us questions. We've been lonely without them, so it is appreciated. Thank you to my team for another 12 months of very hard labor. And, we look forward to catching up again at, well, certainly, the draft determinations. Don't forget, date's in your diary. Draft determination comes out on the twelfth, and we'll be hosting, investor calls on the twentieth. So note for the diary. With that, thank you very much. Have a lovely day.