NORTHUMBRIAN Water has borrowed against future earnings from Kielder Water to settle its short-term debts.

The utilities group raised £212.1m backed by payments it will receive from the Environment Agency (EA) over the next 30 years.

The EA pays Northumbrian Water to regulate the levels of the rivers Tees, Tyne and Wear.

That guaranteed income provided security for the company to refinance debts accrued when it floated on the London Stock Exchange last May.

At the time, the company had debts of £536m. It has already repaid £331m from its savings but needed to repay a further £205m by May next year.

The new deal has spread the debt over a 30-year period.

Chris Green, Northumbrian Water finance director, said the deal would have no impact on customers or the business.

He said: "This is putting the overall company on a much more stable footing. This transaction significantly strengthens the debt profile of the group ahead of the next regulatory period"

The deal has also improved the company's credit rating.

A statement made to the City by the company said: "The transaction does not have any impact on either the ownership or operation of the Kielder scheme."

Anthony Platts, analyst at stockbrokers Wise Speke, said the Kielder deal had removed concerns about Northumbrian Water's debt levels.

He said: "The board decided that they would try an innovative form of financing to raise the required £205m-plus costs, called securitisation, using Kielder as an asset.

"Securitisation is, in effect, a long-term mortgage, but simply using Kielder as collateral was unacceptable.

"Northumbrian has been able to use the cash flows received from the Environment Agency in respect of its Kielder operating agreement to meet the securitisation debt repayments.

"In doing so, the short-term debt repayment worries have evaporated. As a consequence, the debt rating agencies have taken Northumbrian off their credit watch lists and the shares have received an upwards re-rating."