Bad weather slows Severn Trent's capex

25th Jan 2011 07:07

Water group Severn Trent said the recent bad weather in the UK reduced the level of activity in its capital expenditure programme.For the full year 2010/11, the group now expects capital expenditure to be in the range of £400m to £410m, assuming temperatures remain closer to average levels for the remainder of the winter. The level of net infrastructure renewals expenditure included in this figure is anticipated to be in the range of £95m to £100 million.The thaw following the freezing temperatures has also caused leakage levels to be higher than is normal in a typical winter. Severn Trent is working to bring the leakage levels down and treated water storage levels are back to normal. It is too early to evaluate the impact on annual leakage performance, which will be assessed post March year end. The additional cost of repairing these leaks is not material in the context of total current annual operating expenditure.Water consumption levels across the group's measured income base in the second half of 2010/11 will be consistent with the levels seen in the second half of the previous financial year (2009/10), the company said.Bad debt is expected to remain at around 2.3% of turnover for the full year, assuming no significant deterioration in the UK economy.Group exceptional charges of around £20m - £25 million are expected for the full year, mainly related to ongoing efficiency improvements and accelerated deprecation of assets.It is expected the interest charge will rise by around £20 million versus the prior year, before adjustments related to pension accounting, as a result of higher inflation.The effective current tax rate will be at the upper end of the guidance range of 25% to 28%.