China’s acquisition of an 8.68 per cent stake in Thames Water could be a forerunner for significant investment in UK utilities from sovereign wealth funds.
Analysts estimate that the China Investment Corporation (CIC) paid £600-700 million for the shares last week following a trade mission to the country by chancellor George Osborne. It became the second sovereign wealth fund to buy into Thames in as many months after Abu Dhabi’s purchase of a 9.9 per cent stake in December.
Thomas Romberg, valuations leader for the utilities sector at PwC, said: “The CIC/Thames Water deal is another sign of Middle and Far Eastern sovereign wealth fund money seeking a safe but profitable home, at a time when sovereign bond yields of AAA rated countries remain at an all-time low.”
While regulated industries as a whole are seen as safe havens for investors, China’s investment was thought to reflect particularly steady results from Thames.
Frost & Sullivan research director Fredrick Royan said: “The investment by CIC is in a water utility that continues to perform relatively well at a time when water utilities appear to be buckling under some stiff efficiency related issues.”
This article first appeared in Utility Week’s print edition of 27 January 2012.
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