Severn Trent customers in Wales not in market as it bags Dee Valley for £78.5m

Severn Trent Water plans to maintain a separate Welsh licence for all of its operations in Wales – subject to regulatory go ahead. The plan emerged as Severn Trent unveiled its deal to buy Dee Valley Water.

Realisation of Severn Trent's intention would mean business customers of Dee Valley in Wales remain ineligible to take part in the competitive non-household market. despite being in the area of a retailer with most of its business in England. And Severn Trent's customers in mid Wales – who might have anticipated eligibility to switch supplier when the market opens in spring – will not be able to join the market.

The Birmingham-based water and sewerage firm has bought Dee Valley, which has operations in north east Wales and Cheshire, for some £78.5m. In its offer document Severn Trent said it: "intends to maintain a separate Welsh licence for Dee Valley and, subject to regulatory approval, intends that the whole of Severn Trent’s business in Wales will be regulated under Welsh government policy."

In a Statement Severn Trent said it "will be considering how best to manage the non-household retail business post acquisition."

Businesses in the Dee Valley and Severn Trent areas consuming more than 50Ml a day will remain able to switch supplier.

Severn Trent’s chief executive officer, Liv Garfield, said the acquisition represented an opportunity for Severn Trent to “apply its successful operating model for the benefit of customers across an enlarged asset base, in a neighbouring geographic area.”

The deal followed the failure of a £71.3m bid by investment management firm, Ancala Fornia. in October which the Dee Valley board backed but then withdrew its recommendation.

Under the offer FTSE Fledgling listed Dee Valley will receive 1,705p a share in cash cash 1,601p offer for non-voting shares. Severn Trent stock went up 1.92% on news off the deal. Dee Valley has a regulated asset value of £77m.

Cost benefits arising from the deal during AMP6 will have to be shared with customers.