Northumbrian confident of all clear from Ofwat

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The Independent Online

Northumbrian Water confidently predicted it would get a clean bill of health from the industry regulator yesterday, after recent moves to strengthen the company's balance sheet.

Northumbrian Water confidently predicted it would get a clean bill of health from the industry regulator yesterday, after recent moves to strengthen the company's balance sheet.

Ofwat voiced concern last year that the heavily indebted company's credit rating was too low to be sustainable and said it was keeping a close watch on Northumbrian. The regulator is due to provide an updated financial assessment this month.

John Cuthbert, Northumbrian's managing director, said the group's financial position had been "significantly strengthened" by a recent £212m bond issue and the decision of the European Investment Bank to continue to provide it with cheap finance.

He said these measures, coupled with approval from Ofwat to raise prices by 10 per cent this year, had encouraged credit rating agencies to provide investment grade ratings for the company. Northumbrian has £1.77bn of debt against a market capitalisation of £691m.

Mr Cuthbert was speaking as Northumbrian reported a 30 per cent fall in profits for the 10 months to the end of March - the period since its £1bn buyout from the French utility Suez and its re-listing as a public company.

The reduction in profits from £80.6m to £56.5m was due mainly to higher interest charges resulting from the increased debt the company took on to finance the buyout from Suez.

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