United Utilities announced Wednesday current trading was in line with its expectations for the period from Oct. 1 2008 to Jan. 27, 2009.

Looking ahead, management is confident of delivering a good underlying financial performance for the year ending Mar. 31.

The regulated water business continues to invest significant sums in improving the company's infrastructure to provide essential services for customers.

Regulated revenue for the year ending Mar. 31, is expected to grow at a similar rate to that outlined in the group's 2008/09 half year results published on Nov. 26, 2008.

United Utilities' balance sheet remains robust and its asset base is growing in line with management's expectations as the company progresses through the peak phase of its substantial regulated capital investment programmes.

The company's business improvement initiatives are progressing well and United Utilities Water remains broadly on track to deliver its regulatory efficiency targets across the 2005-10 period, although it continues to face increasing cost pressures in areas such as power and bad debts.

The group continues to benefit from a robust financing position and has headroom to cover its projected financing needs until 2011.

During the period, United Utilities Water (A3, stable; A-, stable) drew down a 12 year, GBP400 million loan from the European Investment Bank. In addition, United Utilities Water issued a 6.125%, 7-year bond: GBP250 million in December 2008 and a further GBP50 million in January 2009.

The Board continues to target an investment grade credit rating of A3 for United Utilities Water, which it believes best mirrors regulatory assumptions and is an appropriate investment grade rating to allow the company to raise finance to fund its substantial capital investment programmes.

On Nov. 26, 2008, the Board declared an interim dividend of 10.64 pence per ordinary share, in respect of the six months ended Sep. 30, 2008, in line with the group's dividend policy.

In December 2008, United Utilities was selected as preferred bidder for a substantial municipal solid waste treatment contract in Derbyshire, via a joint venture with Interserve.

This was confirmed by Derbyshire County Council and Derby City Council on Jan. 13, 2009. The contract is due to commence in April 2010 with an expected duration of 27 years and will include the design, build and operation of a new waste treatment facility.

This represents United Utilities' first step into the municipal solid waste treatment sector, enabling the group to utilise its core skills in a new market with significant growth potential.

As part of the 2009 water price review process, on Dec. 19, 2008, Ofwat published its initial draft baseline position for the 2010-15 period under the capital expenditure incentive scheme.

This initial draft baseline represents the first stage of Ofwat's capital expenditure assessment, with a further draft baseline and final baseline still to be developed. It assumes a lower number of projects and outputs and a reduced scope of capital maintenance activity, compared with the proposals included in United Utilities' draft business plan. In addition, the initial draft baseline does not take account of further potential projects which, as outlined previously, United Utilities is likely to include in its final business plan in April 2009.

These areas will continue to form part of the ongoing discussions with the company's regulators.

United Utilities is currently reviewing this initial draft baseline position as part of the overall price review process.

The company intends to propose a level of capital expenditure in its final business plan in April 2009 which it believes represents an appropriate balance to safeguard existing standards of service, address new, higher quality standards and make provision for the challenge of climate change, whilst maintaining the affordability of customer bills.

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