United Utilities puts its electricity assets up for sale

United Utilities is looking to sell its electricity transmission assets in the North-west in a deal that could see £1.4bn returned to shareholders.

The company, which is looking to focus on its higher-growth water assets and its business operating utility assets for other owners, hopes to complete the sale by the end of the year.

The business runs a 58,000- kilometre network, supplying 2.2 million people across the North-west.

Analysts at Collins Stewart calculated that the sale could yield £1.4bn for shareholders, and said the move would be perceived as putting United Utilities in play.

However, Philip Green, who took the helm of United Utilities last April, said the move was the latest stage in the process of transforming the company from a quasi-conglomerate to one focused on higher-growth areas.

"Our strategy is to focus on our core skills of managing water, waste water, electricity and gas networks to create a world-class operator of utility infrastructure," Mr Green said. United Utilities sold its telecoms business, Your Communications, in 2005 and its call centre operator, Vertex, in March.

It is also looking to build up its Utility Solutions outsourcing business to tap the growing market managing infrastructure assets, not least with the contract to manage the North-west transmission assets it has put on the block.

The Utility Solutions unit, which accounts for just under 10 per cent of United Utilities' profits, already has contracts with Northern Gas Networks as well as Welsh, Scottish, and Southern Water, and deals in Bulgaria, Estonia, Poland and Australia. But with private equity firms having raised more than £150bn for funds investing in infrastructure assets, Mr Green sees plenty of scope for growth.

Yesterday the company reported a 16 per cent rise in underlying profits to £561m in the year to 31 March, as revenues on continuing operations rose 11 per cent to £2.3bn.

The water business in the North-west, which accounts for more than 90 per cent of its profits, reported an 18 per cent rise in profits to £750m.

Profits at the outsourcing unit shaded slightly to £66m, although revenues rose 13 per cent to £742m.

The company is looking to save £10m a year from streamlining its business. It is hoping to save another £2m a year from delisting its shares from the New York Stock Exchange.

Shares in the company jumped 3 per cent to 796p.