Welsh Water pulls plug on power link

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WELSH Water, the privatised utility, yesterday sold its 15 per cent stake in South Wales Electricity, the regional distribution company, for a pounds 17.4m profit.

The shareholding was built up in two market raids. The first tranche, amounting to 10 per cent of the the company's equity, was picked up within two days of its flotation in December 1990.

At the time, John Elfed Jones, Welsh's chairman, said that the purchase had been made as a long-term investment and also because it would lead to co-operation between the two utilities.

However, the move soured relations between the two companies, and they were strained further after Welsh lifted its stake to 14.9 per cent in July 1991.

Yesterday the shareholding was placed by Cazenove and County NatWest WoodMac with institutional investors at 460p a share, raising pounds 68.7m after expenses for Welsh Water. South Wales shares fell 8p to 473p.

Wynford Evans, South Wales' chairman, said: 'We are pleased to note that Welsh Water have placed their stake. It is a satisfactory development and will also widen our shareholder base.'

Separately, Southern Water reported a fall in first-half profits from pounds 61.4m to pounds 60m for the year to 30 September, on turnover up from pounds 146m to pounds 160m.

The decline reflects a pounds 6m exceptional surplus in the previous year, which was not repeated in the current year.

However, operating profits rose by 8 per cent.

The interim dividend has been raised by 9 per cent to 7.1p from earnings of 34.4p against 35.3p.

The company's capital expenditure in the first half amounted to pounds 63m against pounds 80m last year, because of delays in obtaining planning consents for the construction of several long sea outfalls to meet EC waste water regulations.

As a result, the year's total spending is expected to amount to pounds 140m, about pounds 40m below target, but next year's budget is now envisaged at around pounds 200m.

The shares rose 2p to 455p.