(Adds details on results, renationalisation)
May 23 (Reuters) - United Utilities reported a rise in annual earnings on Thursday and was the second UK regional water provider this week to warn that the possibility of renationalisation under a future Labour government was a key area of uncertainty.
The blue-chip utility, which supplies water to 3 million homes and 200,000 businesses in the north-west of England, said underlying operating profit rose to 684.8 million pounds ($865.66 million) for the year ended March 31, from 645.1 million pounds a year earlier.
It promised to raise its additional investment by 100 million pounds to 350 million pounds as it responds to the regulatory pressure for improvement in systems after another summer of drought last year. [nL3N1VP2LU
Regulator Ofwat pays incentives to water companies for meeting or exceeding targets set under multi-year business plans, such as project completions and standards of customer service.
United Utilities said it would pay a total dividend of 41.28 pence, an increase of 3.9%.
Rival Severn Trent said this week that a re-nationalisation of the UK water industry could raise customer bills and lower investment.
Labour says that water bills have risen 40% in real terms since privatisation in 1989, while water companies receive more in tax credits than they pay in tax while paying out large dividends to shareholders.
Although a UK election is not due until 2022, and opinion polls show the opposition party falling far short of a majority, its proposals to offer shareholders less than half the current market value of utilities under a future re-nationalisation shook share values earlier this month. ($1 = 0.7911 pounds) (Reporting by Noor Zainab Hussain and Muvija M in Bengaluru; editing by Patrick Graham)