United Utilities says bills to rise with incomes

By John Bowker

LONDON (Reuters) - United Utilities (UU.L) said on Tuesday it does not expect a hike in customer water bills to exceed salary rises, as it reported full-year operating profit rose 7 percent to 677.2 million pounds.

The company, which supplies water and sewage services to customers in the north-west, said the rising cost of debt and higher energy prices were likely to add to the amount regulator Ofwat will allow it to charge customers.

"The regulator has to look at the capital expenditure required, like our (energy) costs and the cost of debt -- the cost of debt is going up," Chief Executive Philip Green told reporters.

He added energy costs of its water business were expected to rise around 60 percent in the current financial year, while investment in its water infrastructure was likely to remain steady over the five years 2010-2015 at about 3 billion pounds.

Ofwat will set the price regime for that period following a consultation process.

"It's a tough challenge, but we don't expect prices to go up higher than incomes," Green said.

United Utilities pretax profit from continuing operations fell slightly to 478.3 million pounds, but was still above analyst expectations of around 471 million, according to Reuters Estimates.

"We have had a successful year (and) we are confident of delivering a strong financial performance over the remainder of the regulatory period," Green said.