Dalmore and GLIL sink £580m into Anglian Water

The joint purchase of the 15% stake from 3i Infrastructure is its second sale in recent days after offloading Elenia, with the two deals representing 40 percent of its portfolio value.

Dalmore Capital and UK-based pension infrastructure vehicle GLIL have jointly purchased a 15 percent stake in Anglian Water Group in a deal thought to be worth £580 million ($775 million; €657.3 million).

The pair bought the share from 3i Infrastructure, and the holding comprised a 10.3 percent ownership and a further 4.7 percent held on behalf of other investors. Anglian Water served as a seed asset for 3i Infrastructure when the unit was launched in 2006.

While the parties involved declined to comment on the full value of the deal, 3i Infrastructure said it received proceeds of £395 million for its 10.3 percent stake, above its valuation of £288 million. A source indicated to Infrastructure Investor that the total is about £580 million.

The sale by 3i Infrastructure follows its offloading of Finnish electricity distribution group Elenia last week to Allianz Capital Partners, Macquarie and pension fund Valtion Eläkerahasto. The transaction, worth a total €3.5 billion, provided 3i Infrastructure with proceeds of £725 million. Elenia and Anglian Water together comprised 40 percent of the listed group’s portfolio value by investment, which amounted to £2 billion, according to its half-yearly report published at the end of September.

The company now has a “good pipeline of potential opportunities” to replace the two assets, said Phil White, head of 3i Investment’s infrastructure business. He added that the firm expects several of these to progress over the coming months.

The deal agreed by Dalmore and GLIL is the first to be announced by the former’s Dalmore Capital 3 fund. The vehicle has a £500 million target and is understood to so far have raised £542 million ahead of its £750 million hard-cap. The investment in Anglian Water is the first to be announced from the fund, although a couple more are believed to be close to being finalised.

Anglian Water is Dalmore’s first purchase of a water company, although it is part of the Thames Tideway consortium. For GLIL, backed by the London Pensions Fund Authority and local authority pension schemes in Manchester, Merseyside, West Yorkshire and Lancashire, the move represents a new sector investment, with previous deals based in renewables and rolling stock.

The duo’s acquisition comes despite UK regulator Ofwat last week promising “profound change” in the industry ahead of its 2019 pricing review and amid a backlash against privately held utilities by the UK’s Labour Party. Anglian Water is the country’s fourth largest water company and has a regulated capital value of £7.4 billion, as at the end of March.

Richard Laing, chairman of 3i Infrastructure, said that the group believed “now is an appropriate time for the company to realise its stake” in Anglian Water.

The water company’s remaining shareholders comprise CPPIB (32.9 percent), First State (32.3 percent) and IFM (19.8 percent).