United Utilities is selling its Norweb electricity distribution business for £1.14bn to a consortium set up by JP Morgan's Infrastructure Fund and Commonwealth Bank of Australia's Colonial First State.
The North-west water and electricity company will return £1bn to shareholders after the deal, which will also see the infrastructure funds take on £642m in net debt.
The business was expected to fetch about £1.5bn when it was put on the block in June.
The funds beat rival bids from Cheung Kong Infrastructure Holdings, the largest publicly listed infrastructure company in Hong Kong, and Arcapita, the Bahrain-based investment bank.
UU will continue to operate the business under an eight-year contract, until 2015, which is expected to boost the company's coffers by another £1.5bn. United will have the option to continue operating the business for a further five years, until 2020.
Philip Green, its chief executive, said that UU will retain 1,300 of Norweb's 1,400 staff, with the rest moving to the new owners.
Mr Green, who took over in spring last year, has been instrumental in steering the company away from its electricity business, focusing instead on United's vast water asset base centred in north-west England.
"I'm very happy with the sale," he said, "I'm happy with the timing, since we only said we would sell the business in June, and I'm very happy with the price, which is well above what anybody expected.
"I am also pleased that United will continue to operate the asset. There is going to be no impact on our customers, who will be served as usual ... and there will be no job losses."
Danny Latham, Colonial First State's head of infrastructure in Europe, said: "The acquisition represents an attractive investment opportunity for the European business given its return profile, essential service nature and stable, sustainable cash flows. The continuing arrangements with United Utilities, which have been operating the network for many years and have an excellent track record, further enhanced our view on the asset."
The JP Morgan Infrastructure fund also led the consortium which acquired Southern Water for £4.5bn last month. The fund also has a 33 per cent interest in the holder of the UK's largest wind energy portfolio, Zephyr Investments. Colonial First State, JP Morgan's partner in this deal, led the £5.5bn acquisition of AWG, another water company, last year.
The funds will be paying a 45 per cent premium on the regulatory asset value of the business, which is forecast to be £1.23bn in March 2008. The business comprises an electricity distribution network of 56,000km of underground and overhead cables in the North-west of England, and covers 2.3 million customers in the Greater Manchester region, the counties of Lancashire and Cumbria, and parts of Cheshire.