Mapping ownership

The Office of Fair Trading (OFT), a UK watchdog, is planning to map out ownership of the country’s infrastructure by this autumn.

Gatwick airport: much
media interest

The independent study – or “stock take”, as the OFT is calling it – will be the first of its kind in Britain and will cover several sectors including transport, energy, water and communications. The watchdog said the UK has been the recipient of some £150 billion (€175 billion; $216 billion) in infrastructure investment over the last five years.

“There have been significant changes in ownership of infrastructure assets in both regulated and unregulated sectors of the economy over the past decade,” the OFT said, adding that it wants to look at how “ownership structures can influence both the intensity of competition and the incentives to provide a good deal for customers”. This includes investigating how highly leveraged structures affect prices for consumers, it said.

But what – if any – impact will the OFT’s autumn report have on the ownership of UK infrastructure?

Not much, as the report only intends to map out ownership, explains David Lee, a partner at law firm Allen & Overy specialising in infrastructure. For the OFT to be able to suggest any restrictions or changes to a sector’s ownership structure, it would have to exercise different powers, Lee says. “As there has been no specific complaint or any view expressed by the OFT as to effects of ownership on consumers, this may well be as far as the OFT’s interest goes,” he points out.

The more interesting question, he muses, is why did the OFT choose to start its inquiry now? “I believe it did so, in part, as a response to increased media interest in the ownership of UK assets.  One example is the press coverage given to Global Infrastructure Partners’ purchase of Gatwick airport and its subsequent stake sales to the Abu Dhabi Investment Authority and South Korea’s National Pension Service.”

But Lee also thinks the OFT is looking forward. As the UK gears up to attract significant private sector investment to plug a reported £500 billion infrastructure gap, the watchdog wants to find out who owns what and find out if there are any unknown consequences of that ownership, he explains.

Given that infrastructure is a heavily regulated sector, Lee doesn’t think the identity of an asset’s owner has much influence on how an asset is run.

Moreover, “the OFT will have difficulty peeling the layers of ownership surrounding an asset, as it will have to report not just who the direct owners of an asset are, but, also, whoever invests in those owners – something infrastructure funds (and their LPs) aren’t traditionally keen to divulge, for good reason,” Lee says.

“Considering that they plan to release their report by autumn, that doesn’t give the OFT much time to find out,” he concludes.