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South Korean pension, USS to fight it out for Veolia UK

AXA Private Equity, Infracapital Partners and the South Korean National Pension Service are set to square off against a team of Goldman Sachs, USS and CVC Capital Partners to buy Veolia Environnement’s UK water assets, valued at around the £1bn mark.

At least two high-profile consortia including two large pensions and some of the infrastructure fund industry’s most prominent names are set to compete for the acquisition of the UK water assets of French group Veolia Environnement.

Sources told Infrastructure Investor that a team of AXA Private Equity (AXA PE), Infracapital Partners – the infrastructure fund of M&G Investments – and the South Korean National Pension Service is set to compete against a consortium of Goldman Sachs Infrastructure Partners, UK pension Universities Superannuation Scheme (USS) and CVC Capital Partners.

Other investors, like Japan’s Marubeni Corporation, have been mentioned in the media, but Infrastructure Investor understands the above consortia are shaping up to be the main contenders for Veolia’s UK assets. None of the above parties could be reached for comment at press time.

Veolia Environnement hired JP Morgan Chase and Deutsche Bank earlier this year to help it sell its UK water assets, which include Veolia Water Central, Veolia Water Southeast and Veolia Water Southeast. Sources said the assets could be worth upwards of £1 billion (€1.2 billion; $1.6 billion), given a regulated asset base around the £1 billion mark. 

The South Korean National Pension Service’s interest in Veolia’s UK assets comes as the world’s fourth-largest pension fund – with $320 billion of assets under management – recently announced that it will open a London office in June, as it looks to double its portfolio of foreign investments from its current $36 billion. The pension spent £100 million last year buying a 12 percent stake in Gatwick Airport from Global Infrastructure Partners, the US infrastructure fund manager.

But its presence in the Veolia deal is also testament to the growing interest of Asian investors in the UK water sector. 

Earlier this year, China Investment Corporation, a $410 billion sovereign-wealth fund bought an 8.68 percent stake in Thames Water for an undisclosed sum. And last August, Hong Kong’s Cheung Kong infrastructure spent £2.4 billion in the headline-grabbing purchase of Northumbrian Water.

The infrastructure arm of business tycoon Li Ka-shing also owns 4.75 percent of Southern Water and used to own 100 percent of Cambridge Water, which it was forced to sell after it acquired Northumbrian Water to avoid breaching UK competition law.