United Utilities backs off from huge water bills rise

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The Independent Online

United Utilities yesterday backed away from a planned 71 per cent increase in water charges in the face of mounting consumer pressure.

"I do believe the number [of the planned increase] will be lower," said the company's chief executive John Roberts although he noted it was "impossible" to say how much lower at this stage.

The supplier for North-west England was looking for a 71 per cent increase in prices in the five years up to 2010 - a move that would have lifted the average water bill from about £243 to £416. The planned price increases and a recent £1bn rights issue are designed to help finance infrastructure upgrades - a move it estimates will cost about £3.5bn over the same five-year period.

United Utilities yesterday reported a 4.4 per cent increase in pre-tax profits to £171m in the six months to 30 September on turnover of £1bn - an increase of 12 per cent.

The star performers in the half-year period were the company's non-regulated infrastructure management and outsourcing businesses, which increased profits by 14 per cent to £32m and 41 per cent to £12m, respectively.

Profits at its core utility business grew 1.3 per cent in the six months to £255m while losses at its telecoms arm fell by 7.8 per cent to £9.4m although that performance disappointed some analysts.

United Utilities said its telecoms business, Your Communications, remained on track to be a net cash contributor to the group on a post-tax basis in 2003/04. Nevertheless, analysts at Cazenove said the division continued to disappoint. They had been expecting a loss at the telecoms arm of £7.4m.

Mr Roberts revealed that United Utilities was considering buying local gas pipeline networks - assets owned by National Grid Transco that are worth about £1bn each.

"We're very much at the beginning of the process," he said, adding the company would need to be convinced that any deal would be positive for shareholders before it went ahead. If, however, United Utilities did decide to make an offer, Mr Roberts said it could strike a deal with a financial partner or buy one of the networks outright - a move that could require it to go back to shareholders for funds.

United Utilities also said yesterday that it expected operating profits at its water business to benefit "significantly" from an expected increase in prices of at least 8.2 per cent next year.

It said its support-services businesses were also on track for growth thanks to recent contract wins and renewals with the likes of Scottish Water, Powergen and Vodafone.