UU shareholders to get £1bn in electricity sale

Nov 24 2007 by Alistair Houghton, Liverpool Daily Post

UNITED UTILITIES has sold its North West electrical distribution network in a £1.78bn deal expected to give shareholders a substantial windfall.

Its North West electrical distribution network – worth more than a quarter of the company’s total value – has been bought by North West Electricity Networks, a consortium including the Commonwealth Bank of Australia and American investment bank JP Morgan.

Warrington-based United Utilities will continue to manage the network until 2015 at the earliest.

But the group, formed in 1995 from the merger of Norweb and North West Water, will now focus on its much larger water and waste water networks which it believes offers more potential for growth.

The deal is set to be completed by December 31 and United Utilities is set to return £1bn to shareholders over the next financial year.

Chief executive Philip Green said: “This meets our target of agreeing the sale by the end of this calendar year and is consistent with our view that shareholders’ interests are best served by our focusing on the much larger water asset base.” Formerly known as Norweb, the electricity business sold by United Utilities, stretches from Manchester to rural Cumbria.

Customers in the North West receive their electricity bill from supply companies who currently pay United Utilities for use of the network.

United has secured a £1.5bn contract to operate the network’s assets, which runs through to 2015, with the potential to extend the contract for a further five years to 2020.

The distribution business is based in Manchester and employs 1,300 people, many of whom are engineers who work from home.

United Utilities owns and operates the water network in north west England, supplying 2bn litres of water every day via a network of around 40,000 kilometres of water mains.

In August 2000, United Utilities sold its electricity and gas supply business, meaning it no longer has any significant exposure to the competitive UK generation and supply market.

Earlier this year, the group sold its Merseyside-based Vertex call centre business for £217.5m.

United Utilities’ shares closed yesterday up 2.06% at 718.5p, valuing the company at £6.193bn.

The £1.78bn price tag for United Utilities’ electricity business includes £642m of debt.

The successful bid team includes the asset management division of the Commonwealth Bank of Australia. It already manages more than £68.3bn of investment across a range of assets in the utility and transport sectors in Australia and Europe.

Utility assets are prime targets for such infrastructure funds as they offer stable and guaranteed income streams. They are seen as safe assets even in an economic downturn and may be less at risk from the turmoil caused by the credit crunch.

alistairhoughton