Kelda stages 'retreat with honour' from US market
Saturday 25 February 2006
The company is selling its US water business, Aquarion, to the acquisitive Australian investment bank Macquarie for no more than it paid six years ago. Acquarion, which distributes water to 677,000 Americans, mainly in Connecticut, fetched $860m (£491m) including $235m of debt.
The latest withdrawal follows a disastrous trans-Atlantic foray by Scottish Power, whose decision to sell Pacificorp cost the energy generator almost £1bn and its chief executive, Ian Russell, his job.
Severn Trent and Anglian Water have also struggled to make successes of ambitious overseas acquisitions.
Kelda's chief executive, Kevin Whiteman, insisted that Aquarion had paid off over the past six years and that its sale left no egg on his face. "It is a retreat from the US market, but it is a retreat with honour because we have not lost any money," he said. "We regard it as a success to get out of the US without losing money."
Experts reckoned that Acquarion has been a disappointment. In 2004, soggy profits were blamed on unusually heavy rainfall in north-east America, which meant that householders in New England, New York and Connecticut needed to water their lawns less. Kelda bought Acquarion in 1999 to ride an expected wave of consolidation across the US.
However, Mr Whiteman decided to sell the business because Kelda did not have the cash to build its American operations by further acquisition. With commodity prices soaring, American utilities are commanding hefty premiums. He said: "Scale is one of the issues for us. We are a small player over there without the necessary firepower."
Macquarie, an infrastructure specialist, already owns three US utilities as well as toll roads, car parks and businesses servicing several airports.
Over here, Macquarie owns the M6 toll road, and has sizeable stakes in South East Water and Bristol and Birmingham airports, among other investments.
Earlier this week, it surrendered ambitions to buy the London Stock Exchange after failing to agree a price at which major shareholders were happy to sell.
Greg Ward, Macquarie's chief financial officer, said: "The Aquarion business has appealing investment fundamentals. The company has a sound reputation and capable management."
The City applauded the sale price, and Kelda shares advanced 20.5 to 808.5p. In December, the company unveiled annual pre-tax profits 20 per cent higher at £19.6m but said that margins were under pressure.
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