The group’s other investments at 31 March 2010 mainly comprise an available for sale investment recorded in respect of the group’s accounting for the retirement benefit obligations for the Northern Gas Networks Pension Scheme (see note 20). In the opinion of the directors, there is no material difference between the book and fair values of these investments. The fair values of the group’s financial instruments are shown in note 19.
The group disposed of its 11.7 per cent economic interest in Manila Water Company (MWC) to Ayala Corporation and Philwater Holdings Company Inc, both existing shareholders of MWC, for cash consideration of US$73 million (£46.3 million) on 12 November 2009. On completion of the transaction in March 2010, the group reinvested approximately US$1.2 million (£0.8 million) in new preference shares in Philwater Holdings Company Inc, which has been classified as a loans and receivables investment in accordance with IAS 39 ‘Financial Instruments: Recognition and Measurement’.
In addition, the group disposed of its 15.0 per cent economic interest in Northern Gas Networks Holdings Limited (NGN) to Cheung Kong Infrastructure Holdings Limited (CKI) and SAS Trustee Corporation (managed by RREEF Alternative Investments), both existing shareholders of NGN, for a cash consideration of £85.8 million on 16 November 2009.
Dividends received from the group’s investments in MWC and NGN prior to disposal have been included in continuing operations, within the non-regulated activities business segment, in the group’s results for the years ended 31 March 2010 (£2.4 million) and 31 March 2009 (£12.3 million) respectively.
The group’s profit on disposal of investments comprises:
Details of principal operating subsidiary undertakings and joint ventures are set out below. These undertakings are included within the consolidated financial statements.
* Shares are held by subsidiary undertakings rather than directly by United Utilities Group PLC.
In relation to the group’s interests in joint ventures, the assets, liabilities, gross income and expenses are summarised below:
The joint ventures have no significant contingent liabilities to which the group is exposed and the group has issued guarantees of £126.8 million to its joint ventures (2009: £80.7 million) which are included in the contingent liabilities total disclosed in note 30.
The shares in subsidiary undertakings balance at 1 April 2009 of £6,326.8 million represented the company’s investment in United Utilities PLC, acquired on 28 July 2008. The value of the investment on acquisition was based upon the closing share price of United Utilities PLC on 25 July 2008. In addition, the company also acquired one deferred A share in United Utilities PLC on 23 July 2008 for £1.00.
The investment of £6,326.8 million in United Utilities PLC has been tested for impairment during the year following the acceptance of Ofwat’s final determination by the group’s principal operating company, United Utilities Water PLC (UUW). The final determination for 2010-15 sets the returns on investment allowed by the regulator for this period.
The valuation of United Utilities PLC for the purposes of the impairment test was based upon a ‘fair value less costs to sell’ approach, which incorporated the regulatory capital value (RCV) for UUW as at March 2010 plus a valuation for the non-regulated businesses. An impairment of £726.8 million has been taken against this investment, reducing the value of the company’s investment in United Utilities PLC to £5,600.0 million, resulting in a net investment, after taking account of intercompany balances, of £4,146.2 million.