Go ahead for Welsh Water takeover

Cheaper bills are promised with the sale of Welsh Water

Glas Cymru - the company promising lower bills if it takes over Welsh Water - has been given the final green light.

On Thursday, Consumer Minister Kim Howells said he had decided not to refer the proposed acquisition to the Competition Commission.

The decision was made on the advice of the director general of fair trading and the director general of water services.

Consumer minister Kim Howells : no referral

Glas Cymru had pledged to reduce water charges for Welsh Water customers - among those paying the most for water in the UK - and launched a "people's bid" back in November last year.

But there was concern that the merger could have adverse effects on competition in the water industry.

But Mr Howells announced that the director general fair trading had advised him that this was not the case.

And, he added: "The director general of water services has already announced that he is content for the proposal to proceed to the next stage - provided Glas Cymru agrees to certain licence modifications and meets certain conditions."

The announcement followed news in January that the water industry regulator Ofwat would not block the takeover bid - but it would attach conditions.

Ofwat's Phillip Fletcher revealed that the company would have to issue a public statement on its much-publicised pledge to cut customer bills.>

People in Wales pay some of the highest rates in the UK

It would also have to state by how much bills would fall.

The company plans to take over Welsh Water from its present owners - Western Power Distribution - and run it on a non-profit making basis.

Instead of paying dividends to shareholders, cash surpluses would be shared with customers in the form of lower bills.

The board of Glas Cymru includes a number of current and former directors from the old debt-ridden Hyder group - a UK-listed water and electricity business which became financially overstretched and was bought out last year.

But the unusual financial structure of Glas Cymru has made this bid a controversial one.

Instead of shareholders the company will be controlled by a group of 200 or so members - led by some prominent names from the business world.

Hostile takeover

They include Geraint Talfan Davies, former controller of BBC Wales.

The purchase price - nearly £2bn - will come from selling bonds in the City of London.

Welsh Water, which supplies water and sewage services to nearly £3m people, was part of the Hyder group which fell victim to a hostile takeover by the US company Western Power Distribution.

Back in January, Welsh Assembly First Minister Rhodri Morgan welcomed the Ofwat decision.

Move welcomed by First Minister Rhodri Morgan

"I particularly welcome the prospect of Welsh Water being owned once again by a company based, managed and controlled from Wales, based on a principle originated in Wales," he said.

"I also welcome the prospect that the form of not-for-profit based finance company brings of initial benefit in the form of lower prices for customers in Wales, given the absence of the need for dividends for shareholders."

Welsh Water will continue to be run by its existing management, overseen by a board of directors.

Western Power had been planning to subcontract the Welsh Water business to Cheshire-based United Utilities.

That plan had been the subject of a legal challenge and had led to fears of job losses in Wales.