Arrest puts Wessex deals in spotlight

THE arrest of Wessex Water chairman and chief executive Colin Skellett in a probe into an alleged £1m bribe sent shockwaves through the water and rail industries.

The affair brought Enron to corporate Britain's doorstep as never before. Wessex was bought by Enron's Azurix offshoot in 1998 before Enron's dramatic collapse put it back on the market.

It was sold to YTL of Malaysia, one of Asia's largest power suppliers, for £1.24bn in May. This deal is believed to have triggered the police investigation.

City bankers and other advisers involved in the lengthy Wessex auction were seeking explanations. YTL said they 'knew nothing of any illegal payment' and were co-operating with the police probe.

Insiders and outsiders alike were surprised by the speed with which YTL won the bidding for Wessex, which had been put up for sale after the dramatic collapse of its parent Enron.

Other Wessex deals will also be re-examined, including the 1998 sale which was referred to the Monopolies Commission for investigation, before being cleared by Trade Secretary Peter Mandelson.

Shares in Jarvis, the rail contractor where Skellett is also chairman, plunged 50p when the news broke, wiping £70m off its market value. Other public contractors also fell.

Jarvis said it was 'seeking more information'. Skellett was part-chairman at £100,000 a year and was not involved in its bids for rail contracts.

YTL supporters say it won the auction by offering cash with fewer strings than other bidders. But Far Eastern rival Hutchison, controlled by tycoon Li Ka-shing, was keenly disappointed. A Royal Bank of Scotland group seemed poised to win and was designated 'preferred bidder'. But it was worried by possible hidden liabilities, especially on pensions, and moved cautiously.