Anglian claims tax will hit bills

Anglian Water, one of the largest privatised water companies, yesterday accused the Government of dishonesty over claims the windfall utility tax would not lead to higher customers bills.

The comments came as Anglian unveiled an agreed pounds 19.5m takeover bid for Hartlepool Water in a move which was unexpectedly supported by the industry watchdog, Ofwat.

Stepping up his attack on the windfall levy, Anglian's finance director, Chris Mellor, said he could not rule out making a legal challenge. He said the levy would undoubtedly hit customer bills in the next price review. "In the long run customers are going to have to pay for this tax. There's no getting round that and to say it won't hit customers is just dishonest."

Anglian brushed off suggestions it could easily afford to the tax, despite kicking off the water company reporting season with a 15 per cent hike in its dividend payout. "This doesn't indicate we've got money to burn. The notion we've got money swilling round is just nonsense. If we have to pay the tax we'll have to borrow to do it," Mr Mellor said.

Headline pre-tax profits fell by 12.8 per cent in the year to the end of March after exceptional charges of pounds 40.8m. Pre-exceptional profits rose by 7.7 per cent, to pounds 257m.

The exceptional charges included pounds 20m in restructuring costs to fund 300 job losses and pounds 18.8m to cover problems with Anglian's international operations. Of this, pounds 7.3m was to cover write-offs from its ill-fated joint venture in Brazil.

The write-offs represented 60 per cent of the pounds 12m which Anglian had paid into the venture.

"It's not an episode we're particularly proud of," Mr Mellor admitted. Asked whether the pounds 12m had gone missing altogether, he said: "There are some pretty complex legal issues. Whether we'll ever get to the bottom of what really went on I don't know. I can't rule out that at any point in time we will take legal action."

Anglian said the bid for Hartlepool Water, which has been a quoted company since 1846, was part of its move to exploit embryonic competitive opportunities in the industrial market. Hartlepool employs 60 staff and has 90,000 customers.

Mr Mellor was surprised Ofwat had not asked for the bid to be investigated by the Monopolies and Mergers Commission. Anglian had agreed to cut Hartlepool's charges by 5 per cent from 2001.

The deal will net almost pounds 1.9m for Hartlepool directors, the bulk of which will be shared between Keith Hall, managing director, and John Bateman, finance director. The 266p a share offer price is 40 per cent above Tuesday's closing price.

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