The sale of Sutton and East Surrey Water (SES) has been given the green light by a watchdog after its concerns were addressed.
Pennon, which already owns three UK water companies, bought SES Water as part of a £380m deal in January.
In May, the Competition and Markets Authority (CMA) said the deal could make it more difficult for water regulator Ofwat to analyse and compare data.
The CMA has now said it would accept the sale after Pennon agreed to give separate reporting information for SES from the rest of its water business.
The competition watchdog previously said it was worried that losing SES’s data would make it harder to estimate cost allowances and set service quality targets across the industry, because it would have fewer points of comparison.
The new reporting measures were “appropriate to remedy, mitigate or prevent the prejudicial effect on Ofwat’s ability to make comparisons between water enterprises”, it said on Friday.
Pennon bought Sumisho Osaka Gas Water UK, including its subsidiary SES Water, in January for £380m.
SES Water supplies drinking water to 845,000 customers across East Surrey, West Sussex, west Kent and south London.
Pennon also owns South West Water, Bristol Water and Bournemouth Water. The company said it was “pleased that the proposed undertakings in relation to the separate reporting of SES Water’s costs and performance have now been accepted”.
Pennon has been dealing with an outbreak of the cryptosporidium bug in Devon, which affected 16,000 homes and businesses in May.
Cryptosporidium is a waterborne disease which can cause unpleasant symptoms such as diarrhoea and vomiting.
Last year, Pennon said it would invest £750m in upgrading its existing water infrastructure over the two financial years to 2025, which it later upped to £850m.
Before the SES deal closed, Pennon reported a pre-tax loss of £8.5m for the year ending 31 March.
At the same time, it gave £112m to shareholders.