Shareholders in Yorkshire Water's parent company will be handed £750 million in a move to reduce borrowing costs.

Kelda has also announced successful figures for Yorkshire Water in the past six months, despite rising fuel costs.

Kelda, which yesterday revealed its interim results for six months ending September 30, has about 50,000 shareholders in Yorkshire.

The company is handing back some shares to redress its borrowing costs.

Rob Salmon, director of corporate affairs with Kelda, said: "It's not a windfall in any kind of way. We are giving them back the same money, but in a different kind of way.

"What it does is enable us to borrow money at a cheaper rate. It keeps our costs as low as possible."

He said Yorkshire Water's figures showed the company was successful at being efficient within all aspects of its service.

As well as owning Yorkshire Water, Kelda also has Kelda Water Services, which manages the group's non-regulated water and waste water contracts in the UK, including one to provide services to more than 1,000 Ministry of Defence sites in the midlands, Wales and south-west.

Yorkshire Water provides water and waste services to more than 4.7 million people and 140,000 businesses in Yorkshire.

The company's turnover increased by 6.9 per cent to £368.9 million. And, at £168 million, the operating profit was 9.7 per cent higher than the same period last year.

Group profit on continuing activities before taxation showed an increase of 10.6 per cent to £120.2 million.

Yorkshire Water, based on Halifax Road in Bradford, said it was well placed to meet financial and other targets set by the independent regulator, Ofwat.

"We have improved our Ofwat service score for the last nine years. We are the only water company to have that level of improvement," said Mr Salmon.

He said the Bradford company had been given seven stars by Ofwat.

"It benefits everyone if service improves. If we are more efficient it keeps bills as low as possible. Hopefully that will continue," said Mr Salmon.

Charles Stanley Stockbrokers analyst Clive Roberts said the results "were slightly below expectations".

He said: "While today's news about the return of cash to shareholders is welcome, it was not entirely unexpected, having already seen similar moves by Kelda's peers. Forecasts could also be shaded down.

"Following the strong upward share price movement on the back of corporate activity elsewhere in the sector, we believe the shares are overvalued and so maintain our "reduce" recommendation."

Kelda chief executive Kevin Whiteman refused to comment on whether the company had received any takeover approaches amid a wave of consolidation in the sector.

Last month Australian bank Macquarie bought Thames Water from German firm RWE in an £8 billion deal.

Kelda shares have risen as much as 30 per cent this year on the back of takeover speculation but were down one per cent yesterday to value the firm at £3.3 billion.

e-mail: rebecca.wright@bradford.newsquest.co.uk