China Investment Corporation buys 8.68% of Thames Water

The $410bn Chinese sovereign wealth fund joins the Abu Dhabi Investment Authority, which acquired 10% of the UK’s largest water utility last December. Thames Water’s biggest shareholder is Macquarie, but the Australian investor was not the seller in this case.

Thames Water, the UK’s largest water company, is continuing to prove popular with sovereign wealth funds, with the $410 billion China Investment Corporation (CIC) following in the footsteps of the Abu Dhabi Investment Authority (ADIA) with today’s acquisition of a minority stake in the utility.
 
In a short statement on its website, CIC said that it has, “through one of its wholly-owned subsidiaries, acquired an 8.68 percent stake in Thames Water”. The sovereign wealth fund did not disclose the sale price nor did it announce who the sellers were. But sources told Infrastructure Investor that the seller was not Macquarie, Thames Water’s largest shareholder with just under 40 percent of the company. Macquarie and CIC could not be reached for comment.

One of the sellers to CIC could be New Zealand-based fund manager Equity Partners Infrastructure Company (EPIC). EPIC announced in the summer of 2011 that it had entered into “formal discussions” to sell its 1.24 percent stake in Thames Water. At the time, it said the sale process could take around five months, which would fit with today's announcement.
 
Last December, ADIA bought a 9.9 percent stake in Thames Water from Macquarie Infrastructure and Real Assets and an unnamed third-party investor. The purchase price was not disclosed. In May 2011, Australian infrastructure fund manager AMP Capital spent £27 million (€32 million; $42 million) increasing its holding in the water utility.
 
Macquarie led the Kemble Water Holdings consortium that acquired Thames Water in December 2006 for £8 billion from German utility RWE. At the time of acquisition, Kemble Water included the likes of AMP Capital, Santander Private Equity, Dutch pension ABP, Alberta Investment Management and Queensland Investment Corporation, to name just a few of the consortium's members.
 
UK water utilities have proven popular with Chinese investors. Last August, Hong Kong’s Cheung Kong Infrastructure spent £2.4 billion buying Northumbrian Water. The infrastructure arm of business tycoon Li Ka-shing also owns 4.75 percent of Southern Water and used to own 100 percent of Cambridge Water, which it was forced to sell after it acquired Northumbrian Water to avoid breaching UK competition law.