Severn Trent doubles incentives estimate, posts rise in profit

FILE PHOTO - A Severn Trent sign hangs on a gate at Cropston Reservoir in Cropston, central England, May 15, 2013. Severn Trent rejected a preliminary takeover offer from a consortium including Borealis infrastructure and the Kuwait Investment Office, saying the offer undervalued the British water company. REUTERS/Darren Staples

(Reuters) - British water utility Severn Trent Plc SVT.L reported a 4.4 percent rise in half-year profit on Thursday, and more than doubled the incentives it expects to receive from the water industry regulator, Ofwat.

Severn Trent said it now expects to earn at least 50 million pounds in outcome delivery incentives in the full year ending March 2018, compared with its previous forecast of about 23 million pounds and slightly above the 48 million pounds it earned last year.

Water companies are rewarded when they meet or exceed targets, and are penalised if they fail to meet them. These targets include timely project completions and better customer services.

Severn Trent, which supplies water across the UK’s Midlands, said it plans to sell land over the next 10 years, and expects to book a profit of 5 million pounds to 15 million pounds each year from the sales.

The company said underlying profit before interest and tax rose to 287.8 million pounds in the six months ended Sept. 30 from 275.7 million pounds a year earlier.

Turnover rose 3.7 percent to 850.4 million pounds, helped by higher prices, cost savings and its acquisition of water company Dee Valley Water.

Severn Trent’s net capital expenditure came in at 270.4 million pounds for the first half of the year, and the company said it expects further increases in the second half and through the rest of its current five-year planning cycle, ending 2020.

The company maintained its target to spend 620 million pounds to 700 million pounds in 2017/2018.

Reporting by Arathy S Nair in Bengaluru; Editing by Saumyadeb Chakrabarty