Challenger makes splash with £168m water co sale

Challenger Infrastructure Fund has sold its 15.6% stake in UK regulated water company Southern Water to an undisclosed investor. The transaction is expected to be settled in January next year.

Challenger Infrastructure Fund (CIF) has sold its remaining stake in UK water company Southern Water for £168 million (€186 million; $278 million).

The Australian listed fund said in a stock exchange filing it is selling the 15.6 percent stake in the regulated utility to an undisclosed buyer, with settlement of the transaction expected to take place in January next year.

Southern Water:
CIF sells stake

The £168 million price represents Southern Water’s net asset value at the end of June, and is 1.26x the utility’s regulated capital value. The sale also includes the remaining balance of CIF’s temporary loan invested in Southern Water, which totals A$12.5 million (€7.8 million; $11.6 million). CIF originally acquired the interest in October 2007, when it was part of a consortium which acquired 100 percent of the company. At this time CIF paid £300 million for a 27 percent equity interest in the utility. It subsequently sold stakes in December 2007 and December 2008 respectively, thus reducing its stake to 15.6 percent.

CIF said the proceeds from the sale would go towards a number of the firm’s capital management initiatives over the next one to two years, including the repayment of its A$122.1 million redeemable preference shares, improving its leverage and deleveraging the fund. It also said the proceeds would go towards the on-market buy-back of up to 10 percent of CIF’s ordinary shares.

Following the transaction CIF now owns controlling stakes in two assets, an 80.4 interest in independent gas transporter Inexus and a 66.2 percent stake in storage terminal operator LBC Terminals.

CIF’s share price closed at an unchanged A$2.01 earlier today.