Water meter deal close

NORTH WEST Water has emerged as a front-runner to buy ABB Kent, one of the world's largest manufacturers of water meters, in a deal estimated to be worth up to pounds 400m.

ABB Kent is part of Asea Brown Boveri, the Swiss-Swedish group, which has made it clear that the instrumentation arm is for sale if the right price is offered.

North West Water has been aggressively expanding its non-regulated businesses and has spent about pounds 150m on acquisitions in the last two years. Metering is becoming increasingly important in the water sector and North West already buys equipment from ABB Kent.

The water company announced pre-tax profits of pounds 230m last year, an increase of 7.3 per cent from pounds 215m in 1991. The non-regulated businesses had a good year, contributing pounds 3.7m to the pre-tax profit.

It is unclear how North West would pay for ABB Kent if the deal went ahead. Heavy expenditure last year on improving water standards and maintaining the distribution system pushed the company to almost pounds 300m debt from around pounds 5m net cash in 1991. Its borrowings are already expected to be 30 per cent of net assets in the current financial year.

The company may also have to take into account the opinion of the regulator, Ofwat, before embarking on such an aggressive expansion plan. Ian Byatt, the Director General of Ofwat, has warned against water companies diversifying to the detriment of water services.