United Utilities said that, although it will transfer its distribution assets to a new owner, the company itself will continue to operate the electricity business under contract.
In northwest England, United Utilities operates and maintains 58,000km of cables, 66 grid substations and 363 primary substations and delivers over 24,000GW hours of electricity annually to 2.2 million domestic and industrial customers.
The company said that it has recently invested a substantial amount in replacing 384km of power lines and cables. Indeed, in fiscal 2006, the company spent GBP748 million on improvements to its northwest water and electricity business, 25% more than the previous year.
Nevertheless, United Utilities said that it was divesting its electricity assets in the region as the company believes that its water business is more profitable and has greater growth potential.
Philip Green, United Utilities’ chief executive, said: Our water business represents over 85% of the group’s regulatory asset value and we believe that shareholders’ interests are best served by our focusing on the much larger water asset base, which offers significantly more growth potential than our electricity assets.
Mr Green went on to say that the board intends to return net equity proceeds from the proposed sale to shareholders.
According to the BBC, United Utilities’ stock rose 4% after the company’s announcement, as industry analysts are predicting that the electricity distribution assets could be acquired for more than GBP1 billion.
