Photo: United Utilities
UU has today announced the sale of its Australian Division for £126m in cash and £30m in debt (A$225m). This is at the lower end of analyst’s expectations. The business was sold to a consortium led by a new entrant to the Australian market Mitsubishi Corp and Manila Water. UU only recently decreased its stake in Manila Water selling out to Ayala Corporation.
United Utilities has made clear its strategy to sell its outsourcing arm but this deal suggest the value of this business may be significantly lower that the company hoped. UU contract solutions has failed to secure contract renewals with Welsh Water and Scottish Water for AMP5 and while they have retained their contract with Southern Water it does have a smaller scope.
Veolia Environment has also hit problems with its long term operating contract model. Its share price has dropped from a peak of $62 in 2008 to $24 today. This does suggest that in these harsh economic times operating contracts are not as attractive as they once seemed.
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