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Severn says big freeze caused rise in leaks

By This Is Money
Updated: 10:05 EDT, 25 January 2011

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The harsh winter weather in December increased leaks and impacted operations at water company Severn Trent.

Cold snap: Freezing temperatures followed by thaw led to increase in leaks

The company said leaks were up due to the lengthy freeze followed by the thaw, but it was too soon to assess the impact on annual leakage figures.

'Severn Trent Water has deployed additional resources and is working to bring leakage rates back down as rapidly as possible and treated water storage levels are back to normal,' it said.

The extreme weather also affected work on the company's capital projects, which include infrastructure repairs.

Severn now expects annual spending on its capital programme will be £400m-£410m – assuming normal weather for the rest of the winter – compared with the £415m-£425m forecast when it issued half-year results in November.

The water company reported no worsening in its bad debt levels during the October 1 to January 24 period.

It expects bad debts to be around 2.3% of turnover for the full year, down from 2.5% in the year before.

But this forecast was made 'assuming no significant deterioration in the UK economy' - and issued just before news emerged of the shock 0.5% contraction in the economy in the last quarter of 2010.

Severn added that group one-off charges of around £20m-£25m are projected for the full year, mainly due to ongoing efficiency improvements and accelerated depreciation of assets.

Meanwhile, water consumption levels across its measured income base are expected to be the same in Severn's second half as during the same period the year before.

The company's share price was up 1p at 1,417p after its trading update.

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