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Santander fund mulls sale of Chilean water company

A possible sale appears to be another step in winding down Santander’s second infrastructure fund, which halted fundraising in the fall. Santander decided against launching the €1.5bn fund due to adverse market conditions.

Spanish banking group Santander appears to have taken another step towards winding down a €1.5 billion infrastructure fund, which halted fundraising in the fall, by examining the possible sale of Aguas Nuevas, a Chilean water utility it acquired earlier in the year from the Solari group.

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Aguas Nuevas said in a statement to the Chilean stock exchange on Tuesday that its only shareholder – the Santander Infrastructure Fund II – has asked for preliminary documents ahead of a possible divestment. However, the utility said it could not give a timeline for the sale process at the moment.

Santander announced in the fall that it would not launch its €1.5 billion second infrastructure fund due to the “current economic situation”. Media sources suggested the bank had only managed to raise some €500 million from limited partners, but decided to abandon the fund after heavy losses Santander sustained in connection to Bernard Madoff’s ponzi scheme. Santander never clarified what it would do with the four investments it had already made, including Aguas Nuevas, for which it is said to have paid between $300 million and $350 million.

It did say that it would continue to be active in the infrastructure sector through its first infrastructure fund, the Santander Infrastructure Fund I, which was launched in 2004. But a spokeswoman for the bank declined to comment on why Aguas Nuevas wasn’t transferred to the first fund instead of being considered for sale.

The second fund bought Aguas Nuevas in January, beating competition from Australian infrastructure fund Challenger. Aguas Nuevas’ 356,000 customers increased Santander’s share of the Chilean water market to 8.8 percent. At the time, Pedro Batalla, of Santander Capital, said the acquisition was part of the group’s long-term commitment to the Chilean water sector. The fund had a focus on European and Latin American investments, and was managed by the Madrid-based Santander Private Equity.

Other infrastructure funds to withdraw from the market this year include Bank of Ireland and ING Real Estate. RREEF Infrastructure also scaled down its US operations earlier this year.