Welsh Water spending pledge

Welsh Water yesterday rejected suggestions that the most senior management in its main operating subsidiary were trying to stop an pounds 850m bid for Swalec, the South Wales electricity company.

After claims that the management feared a cut in environmental investment because of the heavy borrowings needed to fund a bid, Graham Hawker, the chief executive, promised there would be no interference with spending plans.

The pledge emerged after Rhodri Morgan, the Labour spokesman on the environment in Wales, said that dissident Welsh Water executives had approached him to lobby for the bid - expected today - to be abandoned. They feared some of Welsh Water's clean-up plans were in jeopardy.

Mr Morgan said "They were senior people in the operating company who don't want the bid to go ahead." He said there was a culture clash between the group holding company and the operating subsidiary.

The row broke out as Welsh Water was thought to be making a last ditch attempt to win round the Swalec board to an agreed offer. Senior executives of both companies, including Andrew Walker, chief executive of Swalec, and Graham Hawker, chief executive of Welsh Water, were in talks with their merchant bank advisers.

Last week, meetings broke up without agreement after Welsh had made an informal offer of 916p which was rejected as inadequate. Welsh did not rule out a hostile bid.

Mr Hawker said Mr Morgan's allegations were completely false. Welsh had an excellent record in improving environmental standards and "we would not allow any corporate activity to undermine this hard- earned reputation."

The company would continue to honour all its promises for additional spending on the environment. Among these is a pounds 37m investment to raise the number of cleaned up "blue flag "beaches from two to 50.

Mr Morgan's concern about the risk to environmentalspending was backed by the Welsh region of the National Rivers Authority.