Centrica mulls bid for Southern Water

Centrica, the British Gas to AA road services group, is poised to enter the bidding for Southern Water in partnership with the French utility Vivendi.

ScottishPower, the owner of Southern Water, put the business up for sale earlier this year after deciding to abandon its multi-utility strategy.

A successful bid for Southern Water would take Centrica into the one area of domestic utility supply where it does not have a presence. In addition to gas and electricity, Centrica now also offers its 18 million customers telephone, banking, insurance and appliance repair services.

Southern Water would provide the "missing link", enabling Centrica to sell a complete range of utilities to its customers. Vivendi, which already owns Folkestone and Dover Water and has stakes in a number of other small water companies, would operate Southern's network, according to the journal Utility Week.

A number of other bidders are known to be considering an offer for Southern Water. Enel, the Italian utility, confirmed its interest some time ago although ScottishPower rejected its offer as being too low. WestLB Panmure and Nomura are also thought to be weighing up bids for the business.

A ScottishPower spokesman said last night that it was still "weeks to months" away from a decision on Southern Water. He also said a refinancing of the business in preference to a sale had still not been ruled out. This would involve ScottishPower securitising Southern Water – selling its future revenues to bond investors – as a means of financing it more cheaply.