Water industry regulator Ofwat has launched a new consultation on the completed acquisition of a 70% stake in Bristol Water by Canada-based Capstone Infrastructure Corporation.

The consultation is focussed on any regulatory issues arising from the acquisition in Agbar UK Limited (now Bristol Water Holdings UK Limited (BRUK)) by Capstone.

Although Ofwat itself has no formal role in acquisitions or mergers of water companies, it looks to ensure that any owner of a water company is ‘fit and proper’ to provide such an essential service.

As Bristol Water is an appointed water undertaker regulated by Ofwat,  the consultation will seek to establish whether any modifications should be made to Bristol Water’s Instrument of Appointment.

The consultation paper explains the statutory position on mergers and describes the ownership and group structure. It also sets out the regulatory issues which now arise as a result of the acquisition, together with = Ofwat’s initial assessment of the issues.

The regulator is seeking views on the issues discussed in the paper, including:

• the capacity of Capstone to be the owner of a regulated water business;
• the arrangements for the ring fencing of the Appointed water business;
• the need for modifications to Bristol Water’s Appointment; and
• the entity which provides the Ultimate Controller undertaking to Bristol Water as required by Condition P of its Appointment.

Respondents are also invited to comment on any other issues relating to the acquisition that they believe are relevant. Following responses to the consultation, which must be submitted by 20 January 2012, Ofwat will then publish a position paper.

Click here to access the consultation document.