Wessex Water chief denies accepting ?1m bribe

Wessex Water today said its chairman and chief executive, Colin Skellett, had denied receiving any payment during the sale of the company to YTL Power International, a Malaysian company.

"Wessex Water can confirm that Colin Skellett was released on police bail late last night," the company said in a statement. "Colin Skellett has said that no payment, nor promise of payment, was made to him during the negotiations over the sale."

In a move that shocked the City, Mr Skellett was arrested by City of London police on suspicion of receiving a bribe of almost ?1m during the firm's takeover by YTL, owned by one of Malaysia's largest companies. YTL bought Wessex Water in May, when the bankrupt US energy trader Enron, was trying to raise cash.

But Wessex Water said neither Mr Skellett, nor any other Wessex Water directors were involved in the discussions to sell to YTL Power.

"He has indicated that confusion has arisen over a subsequent agreement with YTL which explains the financial transaction for retaining his services over the next five years," the company said. "Colin has provided the police with a copy of the agreement. Wessex Water is pleased that matters seem to be resolving themselves and hope that Colin will be back in the office shortly."

Earlier, Det Sup Ken Farrow, head of the City of London Police fraud squad, said the focus of the investigation was on one individual at Wessex Water. He said there was no suggestion of any wider mismanagement within the company. A second unidentified man was also arrested last night and faces further questioning today.

Mr Skellett, a father of three, has been chief executive of Wessex Water since 1988 and has held a series of operational and management posts with Wessex Water since 1974. He is also the non-executive chairman of Jarvis, whose subsidiary company, Jarvis Rail, is at the centre of the investigation into last May's Potters Bar train crash.

Mr Skellett is being questioned for a second day at an Avon and Somerset Constabulary police station. Fraud squad officers have already completed a search of his home and office. YTL Power has denied any knowledge of illegal payments and pledged full cooperation with the British police in their investigation.

YTL Power was a surprise winner in the bid for Wessex Water - which supplies water for parts of the south-west of England - beating Royal Bank of Scotland. YTL Power paid ?1.24bn for the utility after entering the bidding at the last minute. Enron, which went bankrupt in December, acquired Wessex Water in 1998.

Shares in YTL Power closed at a five-month low of 2.62 ringgit (45p), down 5%, in what analysts said were knee-jerk sales. YTL Power's parent, the hotel and infrastructure group YTL saw its shares drop 5.2%.