Norweb Energi sold to TXU for £310m

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The Independent Online

United Utilities yesterday announced the £310m cash sale of its Norweb Energi residential electricity and gas supply business, which supplies electricity to 1.85 million customers and gas to 400,000.

United Utilities yesterday announced the £310m cash sale of its Norweb Energi residential electricity and gas supply business, which supplies electricity to 1.85 million customers and gas to 400,000.

The sale to TXU Europe, a subsidiary of US utility TXU, removes £176m of provisions from United's balance sheet, boosting the deal's value to United to £486m. Analysts said the sale price on this basis - at £216 per customer - was above the industry benchmark of £200.

United put Manchester-based Norweb Energi up for sale in March. Other bidders are thought to have included British Energy, National Power, Scottish & Southern and Scottish Power.

TXU Europe, which already owns Eastern Energy in the UK, also awarded contracts to United's outsourcing business. Vertex, United's business services arm, will provide customer services worth more than £650m over seven years to the enlarged TXU Europe.

John Roberts, the chief executive of United, said spinning off Vertex was now an option, because nearly 50 per cent of its income will be external as a result of yesterday's transaction.

United is also planning an initial public offering of its telecoms business, Norweb Telecom, next year.

Mr Roberts said Norweb Energi had been sold because new arrangements in the wholesale electricity market, coming into effect later this year, would leave it exposed to greater fluctuations in prices as it had no generating capacity of its own and did not have sufficient scale in the market.

Analysts said a critical mass of about 5 million customers is needed to have a viable business. For the year to 31 March, Norweb Energi recorded a pre-tax profit before interest of £76.2m on turnover of £1.1bn.

Mr Roberts said: "The sale... is an important step in United Utilities' strategy to focus on our core skills of asset management and customer relationship management."

United, whose shares closed up 24.5p at 694.5p, is embroiled in the takeover battle for Hyder, the Welsh electricity and water company. Western Power Distribution, one of the bidders for Hyder, has signed United to run the water business if it wins.

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