Under our licence conditions, we share regulated property disposal proceeds with Severn Trent customers. We do this through a well-established process.
How we share our property profits with customers
Surplus land in the regulated business is either:
- Sold directly to a third party
- Sold to our specialist Property Development subsidiary for further value creation.
The Property Development team create additional value by obtaining planning permission ready for sale or collaborating with others to develop the land.
The terms of sale of any land from Severn Trent Water are approved by an independent valuer, appointed by our regulator Ofwat, to ensure the sale proceeds are fair.
RCV adjustment applied and profit shared
At both stages of the sale we share the profit with customers through the Regulatory Capital Value (RCV).
The RCV adjustment is applied at the end of each five-year Asset Management Plan (AMP) period and consists of two elements.
Customers receive half of the profits from the initial
sale of Severn Trent Water land.
The subsequent sale by the property company is
subject to an overage, which is returned to the regulated business.
The overage will be between 15% and 60% and is determined by Ofwat’s independent valuer. The more difficult the land is to develop, the lower the percentage. 50% of the overage is then shared with customers.