£100m deal sees Northern Ireland Water purchase four plants from its former partner
Company takes control of all treatment works after buyout
NI Water now has complete ownership of clean water production here after acquiring Kelda Water Services' (KWS) holdings in four plants for over £100m, it announced today.
KWS, the owners of Yorkshire Water, had holdings in treatment points in Antrim, Coleraine, Craigavon and Magherafelt, which provide almost half the treated water in the province. But Kelda Group, owner of KWS, put all its non-regulated businesses of KWS up for sale, leading to NI Water's decision to buy out its partner.
Project Alpha was the UK's largest water public-private partnership (PPP), set up in 2006 to help NI Water hit EU Drinking Water Quality Standards. The sale saw NI Water pay KWS £28m for the equity and acquire around £80m debt.
The deal, which was supported by the Department of Infrastructure (DoI) and the Department of Finance (DoF), is expected to allow some 80,000 non-domestic payers to make savings, as well freeing up funds for the economy.
NI Water chief executive Sara Venning said: “The value generated by this transaction will allow the company to apply a downwards pressure on tariffs.
“It also represents an opportunity for NI Water to reduce its ongoing running costs which releases public expenditure for reinvestment elsewhere.”
Len O’Hagan, chairman of NI Water, said: “We are pleased to announce the completion of the purchase of the Project Alpha companies.
“This brings back into NI Water ownership all clean water production in Northern Ireland. This represents a strong fit with NI Water’s strategy to provide clean safe drinking water to our customers and to do so in a way that secures efficiencies for our customers and for the public purse.”
Economist John Simpson said the buyout has saved NI Water in the long-run.
“As with public-private partnerships, the real value of the contract was to get the investment when it was needed and before it could be financed directly by NI Water,” he said.
“Now NI Water will have saved significant sums by bringing the assets into NI Water.
He described NI Water as “one of the most profitable trading organisations in Northern Ireland”.
“This is partly because of the special financial structure put in place at the time of its creation as a wholly-owned state trading organisation,” he added.
Ms Venning also said the transaction will see NI Water add approximately 30 KWS staff members to its team, adding: “We look forward to working with them even more closely as part of the NI Water group.”
Peter May, permanent secretary at the Department for Infrastructure, said: “When the opportunity arose to bring the contract back into government, the department, in consultation with NI Water and DoF, carefully considered the value for money against the benefits to be gained.
“The outgoing minister indicated that where affordability and value for money were proven, purchase of the contract could proceed.
“The completion by NI Water of this transaction will allow them to secure further value to the public purse and will also create an opportunity to free up significant additional operating resource.
“We welcome the initiative taken by the board at NI Water in pursuing the opportunities created by the acquisition.”
The KWS acquisition marks the second major announcement NI Water has made this month. Last week it revealed that it had started work on a £7m solar farm that will see it build 27,000 solar panels on a 33-acre site to support the firm’s Dunmore Water Treatment.
Work on the site should be finished by 2018 and is expected to save the company £500,000 a year in energy costs.
As well as the KWS PPP project, NI Water also entered into Project Omega, a 25-year Public Private Partnership contract to upgrade, operate and maintain existing wastewater treatment works and wastewater pumping stations across seven NI locations.
It is run by joint venture Glen Water Ltd. However, NI Water says it has no plans to purchase the project.