Northumbrian Water shrugs off takeover talk

28/11/2007

The North East water company delivers better than expected results as predators circle the water sector.

Northumbrian Water, seen by some as the next water company in the sights of infrastructure funds, said today that it has received no takeover approaches.

John Cuthbert, the managing director, said: "We have a contented bunch of investors. I suspect everyone is being looked at. There are sill people out there who like the look of the sector, despite the credit crunch. We have not had an approach, if we had we would have had to make an announcement."

The company, which serves 4.3 million people in the North East of England and Essex, is tipped by some to be the next quoted water company to go private following this week's sale of Kelda, owner of Yorkshire Water, to a consortium led by Citigroup and HSBC.

Northumbria Water has already attracted the interest of the Ontario Teachers pension fund, one of the world's biggest infrastructure investors, which has owned a 26 per cent stake in the business for some time.

Today, the group reported a 16.6 per cent improvement in pre-tax profits which rose from £75.5 million to £88 million, slightly ahead of expectations, on revenue up 5.7 per cent to £333.8 million in the six months to the end of September. The interim dividend is up by 0.25p to 4p.

The company, chaired by Sir Derek Wanless, increased its revenue by putting up charges to customers, but said that it would not have to use the full headroom granted to it by the regulator as it has already raised the money it needs for its investment programme through to 2010.

Northumbrian tapped the market in June 2006 to raise funds to contribute to its £1 billion investment programme. The move meant that the company will only need to raise its prices to customers by inflation in the next two years, saving each household and business about £6 a year.

Mr Cuthbert said: "The group has delivered strong operational and financial performance in the first six months."

This summer's flooding did not hit Northumbrian Water as badly as other water companies, but the group has seen a sharp rise in sewer flooding incidents as a consequence of sever storms. There were 816 sewer flooding episodes in the first half compared with 212, in the same period last year.

Northumbrian is taking steps to remove as many houses as possible in the North East from a register of properties at risk of flooding.

The company also said that it has met its leakage targets, which are set by the water regulator. Its leakage figures in Essex and Suffolk are among the lowest in the country over a number of years.

Northumbrian expects to submit an application to extend its Abberton reservoir in Essex next month. The proposal would extend the reservoir by around 60 per cent and help meet demand for water in the Essex region, where the population is expected to grow rapidly in the coming years.

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