China Investment Corporation has bought a stake in the UK’s largest water and sewerage firm days after chancellor George Osborne visited Beijing.
The state-run investment fund has acquired 8.7 per cent of Kemble Water, the holding company which owns Thames Water. It is believed to be the sovereign wealth fund’s first foray into investment in the UK.
Australian bank Macquarie major player in a consortium of investors which owns Kemble. Abu Dhabi Investment Authority, a sovereign wealth fund in the Middle East, bought a 9.9 per cent stake in Kemble back in December.
London-based Kemble provides water to about 8.8 million people and sewerage services to approximately 14 million customers. It serves people in the capital, as well as Berkshire, Kent, Buckinghamshire, Surrey, Wiltshire and Gloucestershire.
Thames’ pre-tax profits more than halved in the year to the end of March as it dealt with a new price regime imposed by Ofwat for the five years to 2015. Its profits were £208.5m, down from £453.6m the previous year.
Macquarie and the rest of the consortium acquired the utility provider from German group RWE for £8bn in an auction in 2006. It had to fight off a number of other bidders, including one headed by the Qatar Investment Authority.
China Investment Corporation was founded in 2007 and tasked with investing billions of pounds of spare cash it has accumulated from selling its goods around the world.
The UK government is reportedly considering setting up its own sovereign wealth fund to benefit from low borrowing costs and could make similar investments overseas.
Foreign investors have bought up large parts of the UK’s infrastructure in the decades following their privatisation.
Spanish group Ferrovial has picked up BAA, which operates London’s Heathrow and Stansted airport, while RWE has bought npower and Macquarie has acquired car parks by buying NCP.
Dubai-based DP World bought ports company P&O, which owns UK assets at Southampton and Tilbury, in 2006 and German group Deutsche Bahn acquired rail and bus operator Arriva recently.