Severn Trent and United Utilities form Joint Venture to Supply Water to Businesses

Two of Britain’s largest utility companies have been given the green light to form a joint venture that will compete to supply water to businesses.

The Competition and Markets Authority has approved plans from United Utilities and Severn Trent to combine their existing non-domestic supply arms into a new offering, which will vie for business customers when competition in the water market opens up in England for the first time next year.

The chief executive of Water Plus will be UU’s business retail director Sue Amies-King, and the chief financial officer will be Stuart Howell, currently Severn Trent’s head of finance for its business services division.

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Severn Trent will pay £3.5m to create the new 50:50 venture which, based on the utilities' current accounts, had sales of £940.2m, gross assets of £200m, and profit before tax of £9.7m for the year ending March 31, 2015.

Water utilities in England are braced for a potential flood of deals, with analysts expecting a wave of mergers, acquisitions and new entrants over the summer ahead of the opening of the English business supply market next year.

In Scotland businesses have been able to choose their supplier for almost a decade and UU and Severn Trent have been active in the market as separate companies. Under the new venture the two hope to leverage their combined experience across England and Scotland by joining their sales, customer service, business strategy and credit management operations in new headquarters in Stoke-on-Trent.

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The new joint venture is the second high-profile merger in recent years after Pennon, Britain’s third largest water company, concluded a takeover of its smaller rival Bournemouth Water for £100m in April 2015.

Late last year the Treasury signalled that the UK’s household water supply market should move away from the regional monopoly framework to embrace competition by the end of the decade. Analysts say new market players, including energy companies, could emerge to challenge the status quo.

Source: Telegraph

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