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Severn Trent faces £35.8 million fine for misreporting

08/04/2008

Water regulator Ofwat is fining Severn Trent Water £35.8 million for misreporting performance information and poor customer service.

Severn Trent has also announced it will plead guilty to two offences relating to leakage data supplied to Ofwat in 2001 and 2002.

The pleas will be entered later today at the City of London magistrates court.

Ofwat's proposed fine on Severn Trent Water represents three per cent of the company's turnover for 2006/07.

Severn Trent Water's shareholders will bear the entire cost of the proposed penalty and it cannot be passed on to its customers, Ofwat added.

Ofwat chief executive Regina Finn said: "Severn Trent Water's behaviour was unacceptable. The size of the proposed fine reflects how seriously Ofwat takes the deliberate misreporting of information.

"This sends a clear message to the company and to the rest of the water sector -
Ofwat will protect consumers and companies must comply with their legal
obligations or pay the price. Any further attempts to deliberately mislead Ofwat
could lead to even bigger fines in the future."

Severn Trent emphasised the misreporting was the fault of the previous management team. As soon as the current board discovered the irregularities it alerted Ofwat.

Tony Wray, chief executive of Severn Trent, said: "What I can say at this time is that we deeply regret the mistakes of the previous regime."

"There is no doubt that the previous regime and culture in place during the era from 2000 to 2004 was overly bureaucratic and lacked sufficient controls and procedures."

The Serious Fraud Office will set out the facts of the case at a later hearing in court prior to sentencing, Severn Trent said.

In addition to the fine and court proceedings, Severn Trent Water is returning money to customers, Ofwat said, by reducing their bills this year and next.