Return to search

Capstone offloads UK utility after higher prices rejected

The £116m sale of Bristol Water comes 18 months after the Canadian firm was ordered to lower prices by authorities and just five years after Capstone’s initial investment.

Canadian energy firm Capstone Infrastructure has sold its 50 percent stake in UK utility Bristol Water in a deal worth £115.6 million ($144 million; €137.9 million) some 18 months after it was ordered to reduce prices by 17 percent.

The deal sees Capstone transfer its ownership of Bristol Water to its majority shareholder iCON Infrastructure Partners III. Capstone confirmed the sale was linked to the UK’s Competition Market Authority’s decision in July 2015 to force it to reduce prices set out in its 2015-2020 review for Bristol Water, explaining that its holding in the utility was “no longer consistent with Capstone's investment objectives”.

In the CMA’s review last year, Bristol Water argued that the prices the regulator had set out would leave it with insufficient funds to run and invest in the business, a reasoning dismissed by the CMA.

iCON last month also bought 30 percent of Bristol Water from Spanish water firm Sociedad General de Aguas de Barcelona.

The sale occurs just five years after Capstone originally bought into the company via its $215 million acquisition of 70 percent of the firm from Suez Environnement. This was reduced to 50 percent seven months later after a $68 million sale to Japan’s Itochu. After last week’s divestment, Capstone said it had realised a Canadian dollar return on Bristol Water of eight percent per annum.

“The sale of Bristol Water not only allows for a significant reduction in Capstone's debt, but also allows us to reduce costs and continue growth in our core business of developing, owning and operating power assets in Canada,” said Michael Smerdon, Capstone's chief financial officer. “We have reduced regulatory and currency uncertainty in our portfolio and continue to pursue opportunities that deliver long-term value for our shareholders.”

Capstone’s Canadian portfolio includes 505MW of thermal and renewable energy facilities. The firm also owns a third of Swedish district heating firm Värmevärden.