Regulator Ofwat has sought to allay fears over the takeover of South Staffordshire Water.

The company, which supplies water services to

1.2 million customers in the West Midlands, was bought by Bahrain-based First Islamic Investment Bank - now Arcapita Bank - through its subsidiary AquaInvest Acquisitions, for £142 million last November. Ofwat has now confirmed its intention to further ring-fence the regulated water-business of South Staffordshire from other activities carried out by its new owners, and bring it into line with other water companies in England and Wales.

It shrugged off concern from WaterVoice Central, which represents SSW's customers which claimed the new structure would result in "opaque and distant owners with no real relationship with the interests and concerns either of customers or employees".

Other representations had highlighted "the remoteness of the owners" and claimed the de-listing of South Staffordshire's shares "could reduce the company's accountability and make it more difficult for stakeholders to access information on the company".

But Ofwat retorted that "many regulated water companies are part of larger groups".

And it added: "In each case we regulate the water undertaker itself, which remains locally managed."

Under the ring-fencing modifications customers will be protected from any risks that might be associated with the parent company.

The Office of Fair Trading cleared the deal last year.