SSE has reached an agreement to sell its “non-core” water business SSE Water to Leep NAV Networks for an undisclosed sum.

The company described SSE Water as a “good business” but said it does not form part of SSE’s main focus on energy networks.

SSE Water was established in 2008 under licence from Ofwat and is a new appointments and variations (NAV) water company which owns water networks and supplies around 20,000 customers across 28 sites in Southern England and Wales.

Leep NAV Networks is a wholly owned subsidiary of Leep Utilities – a joint venture between mid-market investment manager Ancala Partners and private real estate investment and infrastructure company Peel Group.

The transaction is expected to complete by the end of March 2019, subject to approvals, with “no material loss of earnings or gain on sale,” according to SSE.

The SSE Water management team of six staff will transfer and continue to operate the business so there will “be no impact” on customers.

Nathan Sanders, managing director of SSE Enterprise Utilities, said: “Thanks to the team at SSE Water for the strong contribution to Enterprise over the last decade and I know they will be a success as part of Leep, continuing to provide an excellent service to their customers who will not be affected.

“Although it is a good business, the water business is clearly non core to SSE plc’s main focus on energy networks alongside renewable energy, complemented by flexible thermal energy and business sales, therefore this is the right move for the business and for SSE”

Louise Manfredi, managing director of Leep Utilities, added: “Leep is delighted to be acquiring SSE Water. It will make us the leading NAV operator in the UK market and the transaction speaks to the high conviction that we have in the benefits that successful NAV operators can deliver to UK developers, customers and society.

“We plan to continue to provide best in class customer service to our expanded water inset customer base as well as to deliver ‘straightforward connections’ to new developers and connection providers across the country.”

Leep will combine SSE Water with its own operations in the sector, which includes two networks, or “insets”, at Media City in Manchester and Liverpool International Business Park.

The company owns and operates regulated and non-regulated utility networks, including electricity, water and district heating networks, with a portfolio of sites across the country.

Spence Clunie, managing partner at Ancala Partners, said: “NAV companies are currently under-represented compared to incumbents in the market for new water connections in the UK.

“We have high conviction in the growth of the NAV market and Ofwat’s initiatives to encourage a successfully functioning NAV market should support the growth of the SSE Water business.

“There is tremendous potential in delivering water and wastewater networks more quickly and efficiently to developers whilst improving service and value to end-customers. This acquisition represents an excellent opportunity for us to be the leading operator in the NAV sector.”

Ancala Partners completed its acquisition of Portsmouth Water in March last year in a deal believed to be worth between £150 million and £160 million.

SSE agreed to sell a 50 per cent share of its SSE Enterprise Telecoms business to Infracapital for a “total consideration” of up to £380 million in December 2018. The cash proceeds of the transaction will be used to reduce SSE’s net debt.

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