Macquarie adds US utility to its collection

Kelda, a British utility company, breaks even as it sells US water utility Aquarion to Macquarie Bank for $860m, adding to the Australian firm’s growing infrastructure portfolio.

Kelda Group, the third-largest water company in the United Kingdom, said today it had agreed to sell Aquarion Co., a Northeast US water supplier, for $860 million (€724 million).

Aquarion, one of the largest investor-owned water utilities in the US, was scooped up by Macquarie Bank of Australia for a reported $625 million in equity.

Kelda is effectively breaking even on the sale of the utility, chief executive Kevin Whiteman said during a conference call with journalists. Kelda reportedly bought Aquarion in 1999 for close to $625 million, expecting major consolidation in the US water industry. However that consolidation never came to pass, and Kelda has been looking for some time at ways to exit the US and focus on its core UK business.

Sydney-based Macquarie has been aggressively pursuing infrastructure around the world. Last year it closed its £1.5 billion (€2.2 billion) Macquarie European Infrastructure Fund. It is already one of the world’s largest investors in the asset class, managing $85 billion worth of assets in 11 countries including assets in water, energy distribution and generation, transportation, airports, social infrastructure and telecommunications.

Infrastructure, as an asset class, has gained traction in recent years. It is traditionally considered a lower risk asset class because of the monopoly-like characteristics that define the sector, and its protection against inflation. Demand has also been driven by access to low volatility income streams and government initiatives to drive private money into public services.

Macquarie isn’t the only large firm eyeing the sector. In October The Times reported that Goldman Sachs is launching a dedicated infrastructure investment fund, seeking to raise $5.3 billion to target global investments. In February JP Morgan Asset Management launched a new Infrastructure Investments Group, recruiting Canada Pension Plan Investment Board veteran Mark Weisdorf to head the new division. Morgan Stanley has also been reported to be looking into the asset class.

The acquisition of Aquarion is still subject to regulatory approval, including from the Public Utility Commissions in Connecticut, New York, and New Hampshire.