Nomura set to re-enter battle for Welsh Water

The Japanese bank Nomura is poised to re-enter the bidding for Welsh Water with an offer worth about £1.8bn - the same as Glas Cymru, a group of Welsh investors, agreed to pay last week.

The Japanese bank Nomura is poised to re-enter the bidding for Welsh Water with an offer worth about £1.8bn - the same as Glas Cymru, a group of Welsh investors, agreed to pay last week.

Guy Hands, the head of Nomura's principal finance group, is expected to decide in the next week whether to press ahead with a rival offer.

Nomura lost out in the bid battle for Hyder, Welsh Water's parent company, two months ago after the group was sold to the US consortium WPD. Now, WPD has agreed to sell the water business to Glas Cymru, a "not-for-profit" company chaired by Lord Burns, the former Treasury mandarin.

Glas Cymru, which is owned by "members" rather than shareholders and will finance the takeover entirely with debt, has already succeeded in gaining the support of the Welsh political establishment.

If Nomura enters the bidding, then the contest is likely to turn on which bidder is deemed more acceptable by the water regulator, Philip Fletcher.

Welsh Water will be 100 per cent debt financed if Glas Cymru succeeds in taking it over. Glas Cymru will keep ownership of the assets but the operation of the network will be put out to competitive tender.

But Nomura is proposing to put up 20 per cent of its own money as risk-bearing equity. It would operate Welsh Water itself and has recruited Mike Kinski, the former Stagecoach and Southern Water chief executive, to run the business.

Nomura advisers said that the regulator could look more favourably on this ownership structure because it would involve a shareholder bearing the risk of Welsh Water running into financial trouble.

Under Glas Cymru's proposals, it is less clear how the risk would be apportioned and whether its 50 "members" would have any liability.

Glas Cymru says it is confident of gaining regulator approval and has answered all the objections raised by Mr Fletcher's predecessor, Sir Ian Byatt, when Kelda tried unsuccessfully to spilt Yorkshire Water and sell its assets to a customer-owned mutual company.

Mr Fletcher is expected to launch a consultation exercise in the next week to canvass views on the Glas Cymru bid. In the past he has said he is not necessarily opposed to water companies being funded entirely with debt or quasi-equity.