Landmark legal ruling deals blow to WPD plans for Hyder

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The Independent Online

In a landmark judgment for the utilities sector, the High Court yesterday ruled against an American company's innovative plan to outsource the running of the water business of Hyder, the Welsh utility.

In a landmark judgment for the utilities sector, the High Court yesterday ruled against an American company's innovative plan to outsource the running of the water business of Hyder, the Welsh utility.

Western Power Distribution (WPD), the US utility which won Hyder in a takeover battle earlier this year, had contracted out the running of Hyder's water business to another operator, United Utilities.

Severn Trent, a rival water company, had challenged the deal on the grounds that the £1bn contract was awarded to United Utilities and not put out to competitive tender.

Yesterday, the court ruled that the United Utilities contract was in breach of European procurement law. The judgment is likely to mean that WPD will have to abandon its partnership with United Utilities and invite bids from all companies interested in the contract. A later court hearing will decide how soon it will have to do this. WPD is not expected to appeal.

During the bid battle for Hyder, the WPD-United Utilities arrangement was passed by the water regulator, Ofwat, the Office of Fair Trading, the Department of Trade and Industry, and the European Commission.

One analyst said: "Severn Trent has done everyone a service. It removes the uncertainty about the right way ahead for these contracts." Private companies are not generally subject to the European procurement rules, which are meant for government contracts. However, utilities are an exception and the sector is subject to the rules.

The WPD-United Utilities contract was the first of its kind in the water industry. Other companies have followed it closely, as many more such deals are expected to follow.

Brian Duckworth, managing director of Severn Trent, said: "We sought to establish a level playing field and, with this judgment, we have overcome an important hurdle."

The ruling is likely to set back WPD's plans for Hyder by several months. It had brought in United because, as an electricity company, it had no expertise in running a water business.

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