China buys stake in Thames Water

So China has found a lucrative yet safe investment in British utilities company Thames Water, another sign of China’s appetite for overseas acquisitions as it seeks higher-yielding returns than those available from government bonds.

The China Investment Corporation, the country’s $410bn sovereign wealth fund, said it had taken an 8.68 per cent stake in Kemble Water, the holding company that owns Thames Water.

Thames Water, which provides sewerage services to 14m customers and water to 8.8m in London and the Thames Valley, was sold for an enterprise value of £8bn by German utility group RWE in 2006, which included £4.8bn in cash and £3.2bn in debt, according to media reports.

Although the deal has been welcomed with a little more than a yawn as it will bring no new capital to London’s water and sewage searches, it is nonetheless a first step for China that has historically been quiet about its overseas acquisitions.

Jin Liqun, chairman of the CIC’s supervisory board, told the Financial Times:

“The UK has been really very open to capital inflows and investment from other countries, which has been very good for the UK economy. Chinese companies are looking to IPO in London. It is a very positive sign and I think we should be encouraging (Chinese) companies to expand their business in Europe through the gateway of the UK.”
This was echoed this week by Lou Jiwei, chairman of the CIC, writing in the FT, who praised Britain as “one of the most open economies in the world” with a “sound legal system”.

So – what next?

One only wishes that with health and safety issues in China, the government would invest in clean water back home than spend money on overseas utilities.

– Kimiko

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