ONE of Canada's largest financial institutions has splashed out £259m for a 25 per cent stake in Northumbrian Water.

Suez Environment announced yesterday it has sold its 130m shares in Northumbrian to Ontario Teachers, a Canadian pension fund.

Jim Leech, senior vice-president of Ontario Teachers, said: "We are interested in making long-term investments in the water sector and are delighted to become a significant shareholder in Northumbrian.

"We are particularly attracted by the company's focus on its regulated utility activities and the strength of its management team.

"As a shareholder in Northumbrian, we intend to support fully the company and its continuing progress as an independent leading water and sewerage company in the United Kingdom."

The Ontario Teachers' Pension Plan invests to secure the retirement income of 255,000 active and retired teachers of the province of Ontario, Canada.

It claimed the amount paid of just under £2 a share was equivalent to a two per cent premium on the Durham-based company's capital value.

Anthony Platts, analyst with stockbroker Wise Speke in Middlesbrough, said: "This is good for Northumbrian Water. Suez were always going to sell at some stage, and having a 25 per cent shareholder with these intentions puts a bit of pressure on the share price."

Northumbrian Water provides water and sewerage services to 2.6 million people in the North-East and water services to 1.7 million customers in the South-East, through its Essex and Suffolk Water brand.

The group, which floated on the stock market in 2003 after an eight-year absence, made six-month profits of £49.4m to September 30 last year, and turnover of £286.5m.

Managing director John Cuthbert said: "We have enjoyed a long and successful relationship with Suez and are delighted that Ontario Teachers have shown such faith in the strength of our company.

"It is pleasing to see that they have recognised the focus of the company and the commitment they have given us.