In a saucepan over medium heat, cook and stir the Cheddar cheese, Parmesan cheese, and milk until melted and well blended. Mix in the flour and water, stirring constantly, until thick and smooth.
Layer the spinach in the bottom of a baking dish. Arrange the halibut steaks over the spinach, and season with salt and pepper. Pour the cheese sauce mixture over the halibut.
Bake 45 minutes in the preheated oven, until the fish flakes easily with a fork.
