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Friday, 8 March, 2002, 17:48 GMT
Scottish Power to sell water firm for 2bn
Scottish Power
Scottish Power: Focusing on energy
Scottish Power has said it is to sell its water division Southern Water for 2.05bn, but the energy firm's shares tumbled when it added it would be cutting its dividend payment next year.

Scottish Power's shares closed down 6.65% at 382.5p.

Southern Water - which supplies more than one million customers in the south of England - is to be bought by First Aqua, a private company backed by the Royal Bank of Scotland.

The sale is part of Scottish Power's strategy to focus on its energy businesses, which is also leading it to sell its stake in telecoms group Thus.

"This is an important transaction, it concludes the process of redefining Scottish Power as an international energy company," said chief executive Ian Russell.

But the company said its reorganisation would mean a lower dividend from the 2003/04 financial year.

Refinancing plan scrapped

Scottish Power bought Southern Water in 1996 but the company has become less attractive because of strict controls on charges.

"We believe it was in the best interest of shareholders to release capital from Southern Water and recycle it into the energy business," Mr Russell said.

Last year the firm said is was planning to refinance Southern Water, a move which would have raised 1.7bn.

"The sale releases some 300m more than the planned refinancing and significantly strengthens our balance sheet by reducing group net debt."

Future sale

First Aqua is expected to sell Southern Water on to the French utility group Vivendi Environnement, and the company admitted it had been in talks with the firm.

"First Aqua recognises one of its future options is the possibility of a sale of Southern Water to an industrial concern at some point after completion of this proposed transaction," it said in a statement.

"Discussions have taken place with Vivendi Environnement in this respect."

Vivendi Environnement said that it may buy a stake in the firm.

"In the event First Aqua were to offer Vivendi Environnement the opportunity to buy Southern Water, (we) would carefully consider the proposition," the company said in a statement.

See also:

10 Sep 01 | Business
Scottish Power warns on profits
18 Jun 01 | Business
1,350 jobs to go at Scottish Power
03 May 01 | Business
Scottish Power's profits fall
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