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BT Pension Scheme is to acquire a 13 per cent stake in Thames Water, Britain’s biggest water supplier by revenues, in a deal struck with its parent company that is controlled by Australian investment group Macquarie.
The deal with one of the UK’s largest corporate pension schemes comes after the sale of a 9.9 per cent stake in Thames Water’s holding company, Kemble, to the Abu Dhabi Investment Authority in December.
That deal was followed in January by China Investment Corporation, the country’s sovereign wealth fund, taking an 8.68 per cent stake in Kemble for an undisclosed sum.
Terms of the deal with BT Pension Scheme, which is advised by Hermes, were undisclosed. Kemble was formed through the sale in 2006 of the business for an enterprise value of £8bn – comprising £4.8bn in cash and £3.2bn in debt – by German utility group RWE.
The latest sale means nearly a third of the privately held group has been sold over the past six months. It also comes at a time when the UK’s remaining listed water companies have outperformed the FTSE 100 index over recent months because of their status as havens for domestic and overseas investors seeking stable, inflation-linked returns.
In the year to March 31 2011, the latest accounts available for Thames Water, the company generated an operating profit of £600m from turnover of £1.62bn. Pre-tax profits were £208m after it absorbed £426m in interest payments and similar charges. It ended the year with net debt up from £5.5bn at £6.8bn.
The sale also follows a number of other deals in a sector that has just begun consultation with Ofwat, the industry regulator, over the next round of its pricing agreement scheduled to run between 2015 and 2020.
Last August Cheung Kong Infrastructure, controlled by Hong Kong-based tycoon Li Ka-shing, agreed to buy Northumbrian Water for an enterprise value of £4.74bn. Shortly afterwards Capstone, the Canadian infrastructure fund, made its first investment in the UK, buying a controlling stake in Bristol Water for a more modest C$215m (£133m).
Veolia’s UK water business, which supplies water to parts of London and south-east England, is also up for sale with a price tag of about £1.2bn after a decision by its debt-laden French parent to divest the business.