Who really owns the London water?

When the water bills go up or the waterpipe bursts in the street, who are to blame? Well, if you live in London or in one of the surrounding counties the answer is likely to be Thames Water. But who owns Thames Water?

Looking into the actual ownership of this crucial utility provider is surprisingly and maybe even disturbingly tricky and reveals a lot about the way infrastructure is financed today.

As all good stories, there is a once upon at time, which in this case was 1973, when the London and Home Counties’ water suppliers were joined together in the Thames Water Authority, a public body.

Then in 1989, amidst a flurry of public bodies sell-offs, Thames Water was privatised and listed on the London Stock Exchange as Thames Water Plc.

In 2001, German utility giant RWE bought Thames Water Plc as part of a larger investment into water. The price was £4.3bn and the company was delisted.

Following a refocus of its interests towards electricity, RWE sold off Thames Water in December 2006. The buyer was Kemble Water Limited, which is 100 per cent owned by Kemble Water Holdings Limited.

And this is where it all gets rather more complicated.

Kemble Water Holdings Limited was – and still is – really a consortium of investors. These investors were first and foremost Australian and the holding company was led by Macquarie Group, an Australian global investor and manager of infrastructure businesses.

Formally, the investing entities were:

  • Australian investment funds under Macquarie, Macquarie’s European Infrastructure Funds 1 & 2. Both funds are managed byMacquarie Infrastructure and Real Assets (Europe) Limited.
  • Other Macquarie-managed funds
  • Non-Macquarie investors made up largely of pension funds and other institutional investors from Europe, Canada and Australia. Among them, Santander Private Equity, and Finpro, a Portuguese investment vehicle.

Then, in December 2011, Infinity Investments S.A. bought 9.9 per cent of Kemble Water Holding Limited. And there by a 9.9 per cent stake in Kemble Water Limited and a 9.9 per cent stake in Thames Water.

Infinity Investments S.A is a subsidiary of the Abu Dhabi Investment Authority and wholly owned by the sovereign wealth funds of United Arab Emirates. The price was not disclosed, and the Macquarie-managed funds under one remained the biggest Thames Water shareholder.

The next chunk of Thames Water to go on sale was an 8.68 per cent stake which was bought in January 2011 by an unnamed subsidiary of the Chinese sovereign Wealth fund, China Investment Corporation. The sellers were Santander Private Equity and Finpro.

So now the London water is owned by the Chinese people, the people of UAE, assorted Europeans and Canadians and controlled by Australians. The actual Thames Water entity, though, is managed by what judged from their names are likely to be Brits.

Does any of this matter?

In 2006, when the company was sold to RWE, the debt in the company was £3.2bn and the entire company sold for £4.8bn, putting the implied value (enterprise value) of the company at £8bn.

According to the FT, and indeed the interim report ,Thames Water generated turnover of £1.62bn in the year to March 31, 2011, and had net debts of £6.8bn. By September 2011, consolidated debt had increased to £7.366bn.

Compare this with the Telegraph’s report that the Chinese 8.68 per cent stake in the company is worth an estimated £500-700m. This puts the market value of Thames Water at £5.78bn – £8.06bn. If the upper guesstimate holds, then the company has maintained its enterprise value, though the debt has increased. At the lower value, the company is worth less than its debt.

There is no saying that keeping Thames Water public or even on British hands would have made a difference. And any competent investor would know that only sound governance will keep the investment profitable. To that end, we should cherish the substantial investments made from the sovereign funds. At least they will have to answer to the public at home one way or another and supposedly will have to take good care of our water.

Fingers crossed.

–       Anne-Louise

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