The head of Britain's Wessex Water on Friday denied any wrongdoing after police arrested him in connection with an alleged one-million-pound (RM5.7 million) bribe relating to the sale of the firm to Malaysian group YTL Power by a subsidiary of scandal-struck Enron Inc.

Colin Skellett, 57, chairman and chief executive of Wessex Water, was arrested Thursday by police investigating an alleged corrupt payment made when the British firm was bought in May by YTL Power International Bhd for a total of 1.24 billion pounds.

Police said they had released on bail a senior official identified by Wessex Water as Skellett late Thursday, and that he would be questioned again on Friday.

In a statement on its website on Friday, Wessex Water said Skellett denied any payment or promise of a payment had been made to him during negotiations of the sale.

Not involved in decision

It added that neither he nor any other Wessex Water directors had been involved in the decision to sell to YTL.

"He has indicated that confusion has arisen over a subsequent agreement with YTL which explains the financial transaction for retaining his services over the next five years," it said.

It also said Skellett had provided police with a copy of the agreement, and that it was "pleased that matters seem to be resolving themselves and hopes Colin will be back in the office shortly."

In a statement released in Malaysia, YTL Power also denied it knew of any illegal payments made to Skellett.

"YTL Power has no knowledge of any illegal payment and has offered the police its full cooperation in relation to the investigation," the company said in a statement given to AFP's financial newswire AFX-Asia .

A second man, not identified, was also released on bail and is to return for questioning at a later date.

Less complex proposal

Police said the second man had no direct connection with Wessex Water, which provides water to 1.2 million people, and sewerage services to 2.5 million, in southwest England.

Press reports in London on Friday said the deal had raised eyebrows in financial circles at the time because YTL Power had beaten three consortiums to buy Wessex, including one led by Royal Bank of Scotland (RBS) which had earlier been named as the preferred bidder.

The Financial Times , quoting people close to the deal, reported that YTL's offer had been only slightly higher than that of the RBS consortium, but it had been chosen because it was thought to be a quicker and less complex proposal.

The RBS consortium is understood to have been concerned that Wessex might have liabilities relating to the bankruptcy of Enron last year and had wanted to seek assurances from Azurix, Enron's water subsidiary, that it would not be liable, the paper added.

YTL Power also beat Italy's Enel SpA, Hong Kong's Cheung Kong Infrastructure Holdings and Germany's Westdeutsche Landesbank to buy Wessex Water.