UK water utility gets proposal from Cheung Kong Infra

Northumbrian Water announced today that it has received a non-indicative proposal for the company from Hong Kong’s Cheung Kong Infrastructure Holdings. The UK utility has an enterprise value of £4.4bn.

UK utility Northumbrian Water confirmed today that it has “received a non-binding indicative proposal regarding a possible cash offer for the company” from Hong Kong’s Cheung Kong Infrastructure (CKI).

However, the UK utility stresses that the proposal provides “no certainty that an offer will be made,” adding that “a further announcement will be made when appropriate”.

CKI, the infrastructure vehicle of business tycoon Li Ka-Shing, announced earlier this week that it was “in the preliminary stages of assessing a potential cash offer for Northumbrian Water”. It has not issued any statement regarding the non-indicative proposal it has submitted to Northumbrian Water.

Northumbrian Water, in which the Ontario Teachers’ Pension Plan (OTPP) owns a 27 percent stake, provides water and sewerage services to some 2.6 million people in northeast England and water services to about 1.7 million people in southeast England. The utility has an enterprise value of roughly £4.4 billion (€4.9 billion; $7 billion).

While the pension has yet to comment on CKI's intentions, a market source explained that, as the utility's largest shareholder, OTPP will have an important role to play in the process:

“If OTPP is supportive and CKI teams up with it, then there will be less room for other investors in a potential bidding consortium. But if they are not supportive of CKI, then the door is open for other competing bids to come in.” 

Last November, CKI paid £5.78 billion to take over the UK power grid business of French utility EDF, comprising three regional networks serving some 7.8 million customers in London, southeast and eastern England. The acquisition was CKI’s fifth purchase in the UK. 

Should it go forward with the acquisition of Northumbrian Water, it would mark CKI’s third investment in a UK water company, as it already owns Cambridge Water and a close to 5 percent shareholding in Southern Water.