Shareholders in United Utilities are set to receive a £1.5 billion windfall in August, the company said today as it reported a fall in pre-tax profits of 4.8 per cent to £478 million.

The proposed shareholder boost - equivalent to 170p a share - is funded from last December's sale of United Utilities Electricity, the group's electricity supply network. The sale, which generated a profit of £371 million, also helped to increase the full-year dividend by 4 per cent to 46.67p.

Higher water and sewage charges and stripping out restructuring and other expenses helped group underlying earnings to rise 17 per cent to £475 million on revenues 7 per cent ahead at £1.4 billion in the year to March 31.

Ofwat, the water regulator, is likely to allow another increase in charges as a result of the rising cost of debt and higher energy prices, Philip Green, chief executive, said today. The group faces a 60 per cent increase in energy costs, he added. However, he said he did not expect an increase in bills to exceed a rise in customers' incomes.

Mr Green said: “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."

The group invested £826 million during the year on its regulated water and waste water operations, an increase of 45 per cent on the previous year. Mr Green said infrastructure investment between 2010 and 2015 is likely to remain steady at around £3 billion.

The utility has undergone substantial corporate restructuring, following a strategic review by Mr Green. As well as offloading its electricity supply network, the company sold its remaining telecoms interests last June for £76 million.

Mr Green established three priorities in the strategic review: to streamline the business portfolio and refocus on core water operations, to ensure an efficient capital structure, and to improve the operational performance of the water business.

United Utilities now consists of two businesses: the regulated water and sewage operation and a division, which manages regulated assets on behalf of other utilities.

The group was created from the merger between North West Water and Norweb in November 1995. In August 2000 the group sold its electricity and gas supply business.

Mr Green said today: "We are confident of delivering a strong financial performance over the remainder of this regulatory period and continued investment in our assets will help to raise environmental standards further and improve the service we offer to customers."

Shares in United Utilities were up 6.5p, or 0.86 per cent, to 764p at 11.30am.

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