NORTHUMBRIAN Water could be split and its southern assets sold in a deal to cut its parent company's debt.

Suez, the French utility, has commissioned City organisation Morgan Stanley to produce a report on the viability of selling Northumbrian, as reported yesterday in later editions of The Northern Echo.

But industry experts last night questioned whether it was more likely that Essex and Suffolk Water (ESW) - part of Northumbrian since April 2000 - would be sold to a financial institution.

ESW would be attractive to banks in Britain and abroad, as a "safer" investment than stocks and shares.

Unlike Northumbrian, it only deals with water supply, and not additional sewage services.

Paul Garrett, editor of industry publication Utility Week, told The Northern Echo: "Geographically, Essex and Suffolk are nowhere near Northumbrian and Suez could find someone to come forward to buy it. As a solely water supplier it could be a bank would wish to acquire a utility company."

Suez went on record to say it wanted to cut its £18bn debts by a third.

It would get about £2bn for Northumbrian, but by so doing, it would be selling off one of its prized assets.

The industry regulator named Northumbrian as the only company to achieve seven stars for its level of service for water quality, sewage treatment and consumer service.

Mr Garrett said: "Northumbrian Water is one of Suez's best assets. They have helped Suez win contracts overseas but the French company needs the money."

Any deal involving Northumbrian is fraught with difficulties.

Suez's rival, Vivendi Environnement, is already awaiting regulatory approval on its bid for British utility Southern Water and would be unlikely to saddle itself with a bid for Northumbrian.

Also likely to trouble the competitions commission would be a bid from RWE, which runs Thames Water.

Italian utility firm NL was touting for any provider put on the market in the past six months, but it is now unlikely to come to the table after announcing it was retreating from water to concentrate on electricity.

It is feasible that a financial institution will be the one to buy Northumbrian if Suez feels it necessary to clear a third of its debt in one fell swoop.

In the past, The Royal Bank of Scotland and German bank WestLB have expressed interest in entering the utilities market, although WestLB is part of the Swan Group, which owns Mid Kent Water Company.

Northumbrian Water last night declined to be drawn into the debate. A spokesman said: "This is an issue for Suez, our parent company."

Tom Ross of the GMB union, which has 600 members working for Northumbrian, said he was in dialogue with the company.

He said: "We are seeking reassurance that the best interests of our members will be maintained in the event of any sale.