South West pays advisers pounds 5.2m

Utilities: United criticises Offer for underestimating scale of electricity roll-out as two water companies announce rise in profits
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The Independent Online
City lawyers and advisers pocketed pounds 5.2m from South West Water last year working on the group's response to the Monopolies & Mergers Commission investigation into two hostile takeover approaches.

The bid costs came on top of pounds 700,000 spent the previous year, bringing the total to almost pounds 6m, most of which was shared between solicitors Allen & Overy and other merchant bankers and advisers. The bids, from neighbouring Wessex Water and Severn Trent Water, were ultimately blocked by the government. Ken Hill, South West's finance director, insisted the costs were "towards the bottom end" of other MMC investigations.

South West yesterday joined in the wave of generous utility company dividend hikes, raising its payout to investors by 20.3 per cent to 36.7p. Pre- tax profits were up 21.5 per cent to pounds 132.6m. Mr Hill said the dividend, costing pounds 47.4m, had to be set against a pounds 15 customer rebate, which cost the company pounds 10m.

The group sounded a less combative note on opposition to the windfall tax. Ken Harvey, the chairman, recognised the Government had a mandate to implement the tax. "We just have to recognise it's likely to happen. We are not going to be at the forefront of any legal challenge. We are not going to be out there doing the same things as British Telecom have been doing," referring to BT's recent outburst threatening the possibility of court action.

However Mr Hill warned that any moves to toughen leakage targets would have to be included in the next price review by the regulator. Around 21 per cent of South West's water leaks from company pipes, with a further 6 per cent from customer pipes.

Asked about the possibility of a mandatory free leakage repair service for customer pipes, a service already offered voluntarily by some water companies, Mr Hill said: "We might do it voluntarily, but it would be logged in the next price review."

The share price rose by 3.5p to 698.5p.

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