Severn Trent defy labour proposal of re-nationalisation, warns of negative facets

British water utility Severn Trent reiterated warnings on Tuesday about the impact of any future nationalisation of the industry on strategic goals the company has set for itself under its officially-regulated business plans.

The opposition Labour party laid out plans earlier this month under which it would offer shareholders in water utilities around half their current market value under a nationalisation programme should it win the next general election. While opinion polls show Labour is still a long way from winning power, the comments by shadow chancellor John McDonnell in interviews earlier this month drove shares in Severn Trent and other utilities lower.

"The renationalisation of the water industry remains a possibility in the event of a change of Government, and any associated changes in Government policy may fundamentally impact our ability to deliver the Group's strategic objectives, impacting shareholder value," Severn Trent said. The company said it was engaging with the government, Members of Parliament, the Welsh government, regulators and other stakeholders about the future shape and direction of the water sector, repeating earlier language on the issue.

Labour's nationalisation plan has already prompted energy infrastructure owners to warn of damage to investment, high taxpayer costs and a slower transition to green energy. Severn Trent laid out its view on the financial and practical costs of renationalisation in its mid-year results last November.

Full-year results published by the company on Tuesday showed a 6.8% rise in profit as it scored a number of performance-related incentives from regulator Ofwat, offsetting a rise in costs linked to last summer's supply shortages. Severn Trent also said its preparations for a no-deal Brexit well advanced, including a "Brexit Steering Committee" to oversee the contingency and scenario planning necessary to operate effectively if the UK leaves the EU without a deal. 

(With inputs from agencies.)