Hello, I'm Liv Garfield, Chief Executive of Severn Trent, and this is our annual results video. Today I'm in Derbyshire, at our brand new Witches Oak Water Treatment Works. A nd when it's fully commissioned, this will treat up to 93 million L of water a day. Behind me, you'll see one part of the flow, which is our two raw water balancing tanks. This project, as I'll bring to life in the course of the next few minutes, is a really brilliant representation of how we deliver capital design and delivery at pace, of how we really use innovation and try to be groundbreaking in that sense, and how we consistently incorporate the environment in everything that we do. Let me start today with my personal highlights of the last 12 months.
First up would be the fantastic record performance on ODIs, a really strong GBP 150 million in this 12 months. When you look at the five years as a whole, that brings together around GBP 434 million worth of revenue enhancing ODI performance. Secondly, it's the operational performance that has led to those ODIs. Over the five years, 82% of metrics have been in strong shape. Over the actual 12 months, 83% have been greener in deadband, which again is a very, very fine performance. We are really proud of the fact that we are the environmental leaders, and that's why to have five years of consecutive four-star status and unparalleled achievement is something we've celebrated strongly over the last 12 months. We're also confident that we'll get four-star status for this year, which will take us to literally six consecutive years of four-star status.
Now, spills still remain one of the hot topics of the sector. We're pleased to see that we have the lowest spill count in the sector, the lowest average rate, but we know there's more to be done, and we're delighted to invest as strongly this year and actually put in place over 1,800 capital solutions, which we know will give us even stronger performance in the future. Of course, this is the year when we landed an outstanding business plan with Ofwat, where we secured twice the capital investment of the last five years, which puts us in great shape for the future. The reason that we're pleased about that is the benefits to customers and the environment we'll gain. Now, that's it as a start of me. Let's hand over to Helen to take us through the financials in more detail.
Thank you, Liv, and hello everyone. Today I'm delighted to share with you a strong set of financial results to close out AMP7, which sets a solid platform for a new era of growth. Looking at the financial highlights for the year, we've increased our capital investment by around 40% year-on-year to a record GBP 1.7 billion. This brings our capital investment over the last five years to almost GBP 5 billion. A nd this includes over GBP 450 million of accelerated unpaid spend, ensuring we get a great start. That capital investment adds to our capital base, which has grown by 46% since 2020 to GBP 13.7 billion. We've achieved 41% adjusted EPS growth, driven by PBIC growth in the regulated business and lower interest costs. We've delivered a real return on regulated equity of 9.7% on an actual company basis.
That means across AMP7, we've delivered a cumulative RoRE of 9.1%, more than twice the base return. Finally, our proposed four-year dividend is GBP 121.71, in line with our policy. Focusing on the regulated business, PBIC has increased by 22% as revenue increased and we held operating costs broadly flat. Revenue reflects the inflation uplift on the bill and additional revenue for green recovery. It also includes around GBP 100 million of ODI rewards earned previously, now flowing through to revenue. On costs, price effects overall were favorable due to a GBP 91 million reduction in energy prices, which are partly offsetting green power as guided. Pay is the annual increase, and business rates and regulatory fees increased by above inflation.
We are always striving to be more efficient. A nd the GBP 13 million movement shown is a combination of lower, higher, and contracted costs where we have insourced and improved processes around traffic management and other third-party services. We have continued to invest for the long term, which includes technology investment in system upgrades, increasing our headcount through insourcing and for unpaid readiness, and of course the impact of higher investment on depreciation. In the year, we have delivered higher volumes of work, particularly in leakage, to deliver the AMP7 outperformance, as well as put us in a strong position for early in the new AMP. We have also introduced new activity through our waste incident response team to support our drive to reduce pollutions.
We continue to manage a prudent balance sheet with a strong liquidity position reflected in our credit ratings. A nd we have been named in the top category for financial resilience every year this AMP. Our regulated gearing remains low at 62.7%, and our pension deficit on an IAS 19 basis is GBP 120 million, down 67% since the first year of AMP7. That means our pension funding level is now 93%. We issued GBP 1.5 billion of new debt in the year to fund our investment, which is the run rate required for AMP8. These factors combined mean we have among the tightest spreads in the sector, and as a result have achieved 3% RoRE outperformance on financing costs across AMP7, which is significantly higher than the sector average for years one to four.
An example of our approach to financing is our latest debt issue, which was in the Swiss market. This was a new market for us and is also a sector first, demonstrating our diversity in funding sources. Whilst a relatively small raise, in line with our little and often strategy, it priced 88 basis points below our unpaid cost of debt allowance. We have consistently outperformed the base return in every year over the last decade. RoRE for the year to March 2025 is at 9.7% on an actual company basis, reflecting our highest year of ODI reward as well as financing outperformance. For the total AMP, we have delivered 9.1% on the same basis, meaning we have more than doubled the base return and outperformed by over 500 basis points. This reflects our sector leading ODIs of GBP 434 million after sharing with customers.
We have delivered nine consecutive years of financing outperformance and expect to outperform again in AMP8. We have held TotEx at around 1% of RoRE in line with guidance. This is after absorbing significantly higher energy price inflation than our CPIH allowance. In addition, materials and construction costs were also higher than allowed inflation. A nd our TotEx performance reflects our continual drive for efficiency. It is important to remember the AMP8 regulatory framework includes protection on all of these costs for above inflation increases. That brings me to earnings. We have announced today that we expect to double our adjusted earnings per share over the next three years. A nd that is driven by the visibility and control we have on the key drivers of earnings. We have relative certainty over our revenue due to the bill profile being set, which is also linked to inflation.
On energy, we are fully hedged for the year ahead and more than 60% hedged for the three-year period. Of course, this is also boosted by our self-generation in bio resources and green power. One of the benefits we have from our insourcing strategy is that as well as being more efficient, we also have greater certainty over our costs and are less exposed to supply chain inflation. We also have a laser focus on a continued drive for efficiency. On financing, around 2/3 of our debt is fixed, giving us security over the near term for our interest costs. These are the key drivers of earnings and enable me to give this outlook today. A key contributor to growth in earnings is the growth in RCV. During AMP8, we will deliver 59% RCV growth, which is higher than our 15-year average of 28%.
The growth in RCV compounds with inflation, protecting that value over time. This growth matters because it drives revenue. One element of revenue is the RCV runoff, and the other element shown on the slide is the return on the RCV in absolute terms. This value, as you can see, is increasing over time, more than traveling between the start of AMP7 and the end of AMP8, as a direct result of our RCV growth. Over 50% of unpaid revenue is driven by the RCV, which ultimately flows into earnings. It's also important to remember that as a result of the GBP 1 billion equity raise completed in 2023, this growth is fully equity financed for the AMP. Finally, in addition to the earnings outlook we've announced today, I'm pleased to highlight our technical guidance for FY 2026.
This includes turnover at around GBP 2.6 billion due to the annual bill increase and operating costs increasing by up to 12%, reflecting continued investment in operational performance. We have previously guided to GBP 300 million of operational outperformance across ODIs and PCDs over the next five years, with at least GBP 25 million earned in our first year. We anticipate another step up in capital investment to between GBP 1.7 billion and GBP 1.9 billion as we front-load unpaid investment to deliver operational and environmental benefits as early as possible. Thank you for listening, and I'll hand you back over to Liv.
Thanks, Helen. Okay, let me start with sharing why I think it's been such a record year. Firstly, it's the strong wise investment we've made over the last few years that has helped us actually deliver really strong operational performance. Secondly, it's the record year on capital investment that I think then leads us into a future and a new era of growth. Thirdly, it's the performance culture that just pervades the whole of Severn Trent. It's in the psyche of Severn Trent and allows us to really go the extra mile and land those fantastic operational improvements. Lastly, it's our strong regulatory team that helps us secure such a strong price review. Right, come with me and let's go and see some of these assets in action. We're now in my favorite part of the water treatment process, which is the GAC building.
In here, what we do is we use granular activated carbon actually to treat water, take out the impurities and the contaminants. Now, what I'm going to do, and you know that on my annual results video, I always like to actually get involved in some part of operations. What I'm going to do now is initiate an actual backwash. What happens there is that we treat the carbon and then the dirty water comes out and heads to the backwash tanks. Get ready. Let's make sure I get it right. Click on the right button. Off we go. Now you can see the GAC building in all its glory. It's been a strong year actually on the water metrics. 88% of them have been green. I want to start by talking about leakage.
Ofwat set us as a sector a very ambitious 15% reduction target five years ago, and we are so pleased to have absolutely smashed that with a 16.8% reduction. Do you know what? That now leaves us on the latest available data equal or better than the really good European comparators, which is a real highlight for us. Secondly, supply interruptions. You'll remember actually some of you that this used to be a measure that was tricky for us back in the day. Actually, through really good investment, whether that's in commissioning of pipes, whether it's in our entire tanker army of wagons that get out and get customers back on supply, whether it's in the acoustic loggers that allow us to understand and have eyes and ears across the business, we've been able to get that target to green, which is a source of real pride.
It doesn't stop there though. Whether it's low pressure, water quality complaints, or farming for water, as I said, it's been a very strong 12 months. We know there's even more we can do. We've got ambitions to get even stronger in the water space, and that's why we're investing heavily in a brand new workforce of folk to do our mainstay ourselves. I'll share with you now a video that shows you the progress we've made to date.
We've got an exciting investment program ahead of us in the next five years. The whole sector is increasing maintenance work on the water network, and we're already geared up and ready to go. At Severn Trent, we're investing close to GBP 500 million over the next five years to treble the amount of pipework we're replacing, a massive 1,400 km of pipe. If you were to lay that end to end, it would reach from Coventry all the way to Madrid. This is one of the largest projects in the U.K.'s water network in over a decade. How are we going to do that within budget whilst maximizing the benefits to our network? First of all, we're going to be using new technology and a range of innovative low-dig techniques and pipe materials to replace old pipes for new.
These new pipes are expected to last for around 100 years, meaning they'll provide generations of reliable water supply with fewer leaks and less risk to any supply instructions for customers. Next up, we're being really strategic about where we're replacing these mains. Traditionally, the sector has prioritized a large number of renewals, each relatively small in size, but that can mean the bursts simply move along the network and pop up somewhere else. Instead, we're trying a different approach. Our network is split into over 4,200 district metered areas, or DMAs, which are part of the water system for which all inflows and outflows are monitored. This time, when we replace the pipework, we'll be replacing entire DMAs. 95% of our unpaid program is geared towards totally renewing around 150 DMAs, creating future-proof zones in every county across our region.
Not only that, but we're also linking into our smart meter program to fully leverage these benefits. Each customer in the renewed DMAs will be fully smart metered, giving us total visibility over consumption in these areas. We know about a third of all leakage is on private properties, so we'll have the information we need to identify those long-standing hidden leaks. All of that will contribute to a reduction in leakage of 16% by 2030. Finally, to ensure that our plans are resilient at a time when demand across the sector will be rising, we're insourcing a brand new 450-strong team from our local communities. By developing and utilizing the expertise in-house, we'll build up an unparalleled base of knowledge on our network.
This also gives us greater security over our costs, along with greater flexibility and economies of scale, meaning we will be able to achieve the work more efficiently. We expect the upfront investment costs of insourcing to pay back within the next five years. This all means we are able to rapidly apply innovations such as AI and other cutting-edge technology. To date, we have already recruited over 50% of our team, and following a 12-week training plan at our bespoke training academy, the first of these are already out on the road getting stuck in. In the next 12 months, we are aiming to have all 450 new Severn Trenters up and running, with 210 km of pipe replaced over 40 DMAs. We have got a fantastic opportunity to really do this differently.
By establishing our crew now, we are setting ourselves up for success, not only during AMP8, but for AMP9 and beyond. There's no one else in the industry doing it quite like we are.
I'm stood on top of the wash water and the melotax. What these tanks do is they separate water and the dirty part of it, which is sludge. What's great in a circular economy world is that the water goes back and basically we take it back around and reuse it as part of the water works, and that eventually becomes water, clean drinking water. The sludge, what we do with that is we take that away to our nearby Derby wastewater treatment works, and we actually create energy out of that, which means everything becomes good. Now, thinking about wastewater, it's been a strong year. In particular, if you look at our best ever performance on internal surfloading, which is a result of the insourcing that we did to really speed up response times, has been a really, really strong decision.
And also best ever on blockages. We are also pleased actually with some really excellent performance on Water Framework Directive and also collaborative flood resilience. Of course, we were green on serious pollutions. We were amber on the actual pollution metric, which we were disappointed in. We know that any pollution is one pollution too many. That is why we are investing GBP 400 million over the next couple of years to really make sure that we invest in more complete ownership of the activity ourselves. We are going to insource some of the more reactive, complex repair work. We are also going to make sure that we look at all of our works and upgrade to an even higher standard at pumping search stations, for example. We are confident that this will see an improvement over the course of the next couple of years.
I'm going to take you inside now to the ceramic membrane building. We're now inside the ceramic membrane building. There are 14 membranes actually behind me. This is all part of the treatment process, which is the first of a kind for us. It's all about innovation, and it helps reduce chemical usage. This is just one example of the size and scale of capital delivery that we've delivered over the last 12 months. In fact, our combined delivery program has been GBP 1.7 billion. It's seen us successfully close off almost all of our green recovery work, which is fantastic. It's also seen us accelerate GBP 450 million worth of unpaid spend into AMP7.
It means that we're on exactly the right runway to head into the next AMP to thrive as we go into what is going to be a huge period of investment. We're really pleased with our supply chain. It's diverse, it's well proven, and of course, we've got many activities ourselves already insourced. Because the vast majority of our projects are actually under GBP 20 million, it also gives us the chance to really use our groundbreaking plug and play technology as well. I hope you get a sense of how prepared we are, how excited we are about the investment we've made to date. With that, I'm going to take you somewhere totally different.
I'm going to take you now over to the wetlands to see how the combination of the membranes here work together with the environment to make a really efficient water treatment process. I'm stood in front of our floating wetlands. What we have is 31 floating reed beds that effectively pre-treat the water that comes to the river and make sure that by the time it gets to our Witches Oak Water Treatment Works, we actually need to use less chemicals and have a more efficient process, having also contributed to biodiversity. Now, let's talk about our environmental performance. It's been a strong 12 months. Starting with spills, we're proud to have the lowest spill rate in the sector, but we know there's more that can be done. That's why we've put in over 1,800 solutions.
That means we're really confident of a 25% year-on-year improvement and under 18 spills in the year ahead, having had a very strong first five months of the year. When we think about nature and biodiversity, and there's no better setting for that, we feel really delighted to have contributed so strongly to the nation's ambitions in biodiversity. We've actually contributed 3% to the nature recovery network ambitions. When we think about rivers, then we know that there's more that we can do. We're already down to 10.8% on our NACs, and we've got an ambition to get to below 2% by 2030. Again, we've done a whole heap of activities and schemes to continue those ambitions and make sure that they're on track. Adding all of that together, it's why we're so proud to be seen as the environmental leader in our sector.
We know that the measure for that is the EPA rating handed out by the Environment Agency. We've had five years of four-star status, the highest accolade. That's an unparalleled achievement. We're confident of landing our sixth four-star status this year, which would be absolutely fantastic. Now, it's often discussed, is EPA? What does it mean? What are the measures? We thought we'd have a video now to bring to life exactly how that journey works.
Our customers rightly expect us to take care of nature, and we are committed to meeting and beating our environmental targets. The key measure that judges sector performance is the annual Environmental Performance Assessment, or EPA. The EPA is a set of seven metrics that the Environment Agency used to determine water companies' performance to make sure we are looking after the environment. Severn Trent has consistently led the sector on environmental performance, having achieved the maximum four-star rating for an unprecedented five consecutive years. That involves being rated green on at least six of the seven measures in each year. It's not easy, and it certainly doesn't happen by chance. Each metric has a challenging threshold set by the Environment Agency. The targets ratchet down each year, and as such, we have to improve our performance each and every year to achieve the much coveted four-star rating.
Let's look in more detail at how we deliver against those seven measures and why we're confident that we can continue to lead the sector on EPA in the future. First up is discharge permit compliance. This measure ensures that discharges to the watercourse from our treatment works are fully compliant with their permit conditions. This is a core EPA metric, meaning if we don't hit green, we can't achieve four-star. To hit our target, we need to achieve 99% permit compliance across our sites. Thanks to our consistently high standards and processes, we have operated above this level for the past five years to achieve green status. Going forward, we're focused on new digital solutions which provide more predictive analysis on risks across our network, allowing us to optimize our asset performance. Next up is WINEP.
This is our environmental investment program agreed with the Environment Agency and Ofwat at the start of each five-year investment period and includes a variety of projects aimed at improving environmental resilience and managing flood risks. To meet our target, we need to complete 100% of our WINEP schemes within planned deadlines, something we have achieved in each of the past three years. Having scaled up our capital program during AMP7, we're on the right run rate to deliver GBP 3 billion of environmental investment over AMP8. There are pollutions that make up three of the seven measures. Firstly, we are measured on the total number of pollutions that we're responsible for. Secondly, we have an additional metric specifically for serious pollutions, which are asset failures across our network that have the potential to result in significant harm to a water body.
Finally, there's self-reporting of pollutions, which means ensuring that we keep the E A informed of any incidents that occur. We have already invested in a waste operational control center with 40 new employees, assisted by AI tools such as Storm Harvester, improving our ability to monitor and respond to alerts. To ensure we keep on top of increasingly stretching targets, we're investing GBP 400 million over the next five years, upgrading our pumping stations and insourcing more key skills. We come to Supply Demand Balance Index. This assesses whether we've provided a supply of water throughout the year, which meets customer demand and usage, while maintaining our assets and minimizing and quickly fixing leakage. We have successfully met this metric every year since its introduction, including bringing leakage down to its lowest ever level and beating our reduction targets in each of the past seven years.
In AMP8, we will be continuing to invest heavily in water supply schemes to meet growing demand while reducing leakage levels by a further 16%. Finally, we have satisfactory sludge disposal. To get green on this metric, we have to safely recycle or dispose of 98.2% sewage sludge, but we have actually achieved a 100% success rate across AMP7. We plan for this success to continue, utilizing our dedicated team of compliance technicians and farm liaison officers and their passion for agriculture and the environment. What does the future hold? These EPA metrics are reviewed every five years with plans to expand on the existing metrics. The consultation has been underway, and we are awaiting the outcome with 14 metrics under consideration for inclusion, including storm overflow spills.
We've been tracking all of these metrics and making the investments we need to ensure we're set up to outperform whatever the next five years holds. Environmental leadership is embedded at every level of Severn Trent, and we have a proven track record of consistently leading the sector on the EPA. Whatever changes are ahead, we're confident we can continue performing and drive improvement to our environment.
One of the loveliest things about Severn Trent is that we are right at the heart of our community. In a location like today, we've got people walking their dogs, people fishing, and that actually is quite special to be able to contribute back into people's wider lives. Now, in terms of actual contribution to communities, to customers, and to our people, just a couple of highlights for me. The first is, two years in, we've already achieved 25% of our target to have 100,000 people out of poverty, which is an entire company commitment and is something we're so proud of.
It is the lovely Severn Trenters that make coming to work every day such a pleasure, and that's why we're again really proud to be in the top 2% of utilities in terms of engagement scores, and to actually have been voted at 29th company in the Glassdoor list. Again, some real highlights for us over the last 12 months. That is it from me. We're going to wrap it up now, but to do that, we'll head back to the heart of Witches Oak. It felt fitting to end the tour of Witches Oak with the water treatment tank behind me, which is the treated water that would go straight into supply when the site's fully commissioned. Now, looking ahead to the future, let's talk about the next five years.
We thought we'd put forward an outstanding plan to Ofwat, and we're pleased that they also agreed and named it as outstanding. That plan now means that we've got GBP 6.4 billion worth of enhancement spend. It means that our RCV is going to grow by 59% over the next five years. It's going to help us deliver GBP 300 million worth of operational outperformance. It's going to mean that we transform the environment and customer experience and service, and added all together, it's going to put us in a really strong shape for future stronger, even stronger balance sheet and future earnings growth. I want to say thank you and farewell from Witches Oak, and head back and we'll answer some Q&A, Helen, myself, and the rest of the senior team.