Severn Trent (SVT) provides water and wastewater treatment services to the U.K (2010 Rev: 86%) and worldwide, servicing utilities, municipalities and commercial customers. Operational efficiency is key to driving earnings with productivity gains expected from infrastructure investments (sewer flooding) and customer service improvements under Asset Management Period 2010-2015 (AMP5). Near term, SVT faces risks from: 1 )lower inflation and asset transfers (private drains & sewers- Oct 2011) decreasing regulated earnings; and 2) non-regulated earnings being affected by companies facing project financing difficulties and uncertainty about government stimulus packages. Longer term earnings will be driven by water scarcity, population growth and higher regulatory requirements. Earnings visibility is high due to the regulated nature of the business and the order book of the services businesses with M&A presenting potential upside. Hedging shields it from volatile operating energy costs. Leverage appears high but is expected given lower cost of debt, asset backing and earnings certainty.