Enter multiple symbols separated by commas

United Utilities Offers for Sale Its Power Unit, Profits Rises

Britain's United Utilities is putting its electricity distribution business in northwest England up for sale to focus on its water assets, it said as it reported a 16% increase in annual profit on Tuesday.

"We are initiating a sale process for our electricity distribution assets," Chief Executive Philip Green said. "We expect to return to shareholders the net equity proceeds from the proposed sale."

Analyst Verity Mitchell at HSBC said the power network might sell for between 1.2 and 1.3 billion pounds ($2.58 billion). "There should be a fair amount of competition, which could push up the price," she added.

United Utilities Finance Director Tim Weller told reporters the assets had regulatory asset value -- the industry standard -- of around 1.1 billion pounds, and recent utility deals had been concluded at multiples of around 120% of regulatory asset value.

United shares rose 3.7% to 801-1/2%, valuing the whole group at around 7 billion pounds.

United operates a 58,000 kilometre electricity network for 2.2 million customers in the north west of England, taking electricity from the National Grid network. It plans to sell the assets but continue operating them.

The group said its water business, which comprises over 85% of its asset value, would become its main focus as it offered significantly more growth potential.

Underlying group profit before tax was 561 million pounds in the year to March 31, up from 484 million a year earlier.

Green, who took charge last April, said United was more interested in securing new contracts for its outsourcing division than it was in hunting new acquisitions after the sale of its power assets.

"With the current level of interest in infrastructure, there should be a high level of demand," he added.

On the company's water business, Green said United had met its leakage targets for the first time in five years and had halved its number of pollution incidents.

The group said it was talking to regulators about the need for additional spending of up to 500 million pounds to curb sewage discharge into rivers and the sea.

The total dividend for the year was raised by 2.4% to 44.93 pence.

Following the proposed sale, the group plans to review its capital structure and dividend policy.

Contact U.S. News


    Get the best of CNBC in your inbox

    Please choose a subscription

    Please enter a valid email address
    To learn more about how we use your information,
    please read our Privacy Policy.

Don't Miss

  • In a rare menu test, Chipotle is testing a Chorizo Burrito, a spicy sausage made with chicken and pork, in its Kansas City restaurants.

    In a relatively a rare move for Chipotle Mexican Grill, Chipotle began testing a new menu item Tuesday.

  • A prototype of a Diebold bank branch of the future.

    Big banks are spending on futuristic branches, but it's all a waste of time and money, say financial technology experts.

  • Nouriel Roubini

    Nouriel Roubini explains how and why more economic liquidity may have led to "severe market illiquidity."

U.S. Video