United Utilities (UU) has agreed to sell its principal non-regulated water interests in the United Kingdom and Europe to Veolia Water UK PLC. The transaction value is £174.2 million, with UU receiving £108.6 million in cash on completion and Veolia taking on £65.6 million in net debt. The UK’s largest listed water company could also earn a further £10 million in cash, payable on a deferred basis, subject to certain contingencies.
Completion of the transaction is expected in the second half of 2010, subject to a number of consents and regulatory approvals. United Utilities expects to retain the proceeds within the group.
The sale is a continuation of UU’s strategy to sell off its non-regulated businesses. Last November’s sale of stakes in Yorkshire gas distributor Northern Gas Networks for £86m and Philippines-based Manila Water Company for £54m was followed by last month’s sale of its Australian subsidiary, United Utilities Australia, for £136m. The non-regulated businesses have generated about 5% of the group’s operating profits.
In the United Kingdom, Veolia Water is acquiring a portfolio of UU’s outsourcing, industrial engineering and infrastructure contracts, including its UK industrial solutions business and minority stakes in three PFI contracts in the Tay, Moray and Highland wastewater treatment plants in Scotland. In the UK, UU’s interests included stakes in two contracts with Southern Water – for the capital delivery contract to manage the design and build of a new wastewater treatment works in the Brighton and Hove area and the 2010-15 capital management contract.
France-based Veolia Water said that combined with its existing activities, the acquisition would make Veolia Water the leading player in the non-regulated UK water sector.
United Utilities is also selling off a range of interests in Eastern Europe to Veolia, including a controlling (58%) stake in Sofiyska Voda, the company operating water supply and treatment services for the city of Sofia in Bulgaria. In addition, Veolia Water will become the lead industrial shareholder, with a 26% stake in AS Tallinna Vesi, a company that provides water supply and treatment services for Tallinn, Estonia. It will also take a 33% stake in Aqua SA, the company operating water supply and treatment services for the city of Bielsko Biala in southern Poland.
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