Severn buys East Worcester Water

SEVERN Trent, the water and sewage utility, has acquired East Worcester Water, a local water supply company, from Biwater for pounds 33m in cash.

The acquisition, which has received regulatory approval, is the first of its kind by one of Britain's 10 privatised water utilities.

East Worcester supplies about 100,000 customers in the South Birmingham area and operates within Severn Trent's sewage boundary.

Severn Trent said the purchase would bring considerable economic benefits to both companies, which have had trading links for many years. Severn Trent already provides East Worcester with bulk water supplies and handles sewage for its customers.

In addition, East Worcester's customers would also benefit from lower increases in water prices and by April 1996 their charges will be brought into line with those of Severn Trent's users.

Ofwat, the consumer watchdog, estimates that the merger will save about pounds 18 per household over the next two years.

'This merger should bring positive benefits to East Worcester's customers and there will be no impact on charges paid by Severn Trent's customers,' it said.

Severn Trent said the purchase would not dilute the group's earnings, although its borrowings are expected to rise slightly but will remain below 10 per cent of its net assets.

East Worcester reported taxable profits of pounds 3.88m in the year to 31 December on sales of almost pounds 14m.