Hermes raises stake in Southern Water

Hermes Investment Management has bought an additional stake in UK utility Southern Water from Australia’s Future Fund.

Snapping up the 17 percent holding will allow the London-based fund manager to own 21 percent of the company, in which it first invested in 2007. Hermes is investing in the business “on behalf of clients” without using its flagship infrastructure fund, a spokesperson for the firm told Infrastructure Investor.

Hermes closed its infrastructure vehicle a year ago, collecting a total of £1.16 billion ($1.7 billion; €1.5 billion) for the main blind pool together with related accounts. The fund itself, for which Hermes raised £1.0 billion, had a target of £800 million.

Southern Water covers an area encompassing Hampshire, the Isle of Wight, Kent and East and West Sussex. It supplies water to more than 2.4 million people and wastewater services to 4.6 million people.

The company is owned by the Greensands consortium, which bought Southern Water from UK lender RBS for £4.2 billion. At the time, the consortium included a fund advised by JPMorgan Asset Management, Australia's Challenger Infrastructure Fund, UBS Global Asset Management and Hermes.

Challenger then sold its stake to Future Fund, with Canada’s Northleaf Capital Partners later coming on board through buying a small stake from two Australian pensions. Hong Kong-based Cheung Kong Infrastructure also owns 4.8 percent of the business.