Water Industry News
UBS eye RWE unit Thames Water: report
Qatar's state-owned investment fund has teamed up with Swiss banking
giant UBS to bid for Britain's largest water and waste group Thames
Water, the Financial Times reported yesterday.
RWE, the German power group that owns Thames Water, is looking to
either sell or float the utility.
The FT did not name its source, but said UBS would use its Global
Infrastructure fund, launched in May, to provide part of the
financing for the deal, which could value Thames Water at up to £7bn
The move by the Qatar Investment Office comes as Gulf governments
seek to diversify their holdings by investing huge sums of capital
earned owing to record oil prices, the business daily added.
Meanwhile, people familiar with the matter said yesterday that
bidders for Thames Water have been given an extra week to submit
The bidders, whose offers were initially due next week, now have
until August 15 to make indicative offers for the water business,
the people said.
Water companies are attractive acquisition targets for financial
investors because they operate as regulated local monopolies. This
gives them a stable flow of revenue, which makes it easy to raise
debt and pay off the interest.
The large size of Thames Water makes it a big chunk for most
financial bidders, however, and is forcing most of those interested
into a race to form consortia.
Several such groupings are likely to bid, including one led by Guy
Hands's Terra Firma Capital Partners and another by Australia's
Macquarie Bank Ltd, the sources said.
Other bidders are likely to include financial buyout firms and
UK-listed buyout group 3i Group has linked up with Canadian
investment fund Borealis Infrastructure.
A spokeswoman for UBS declined to comment on Thames but said UBS is
setting up an infrastructure fund to invest in such assets.
"UBS Global Asset Management, together with UBS Investment
Bank, has launched a new business that establishes and manages
infrastructure funds globally," said the spokeswoman.
"The business, called Infrastructure Funds Management, will
originate and manage funds of listed infrastructure securities and,
working with UBS Investment Bank, funds which invest directly in
infrastructure and utility companies around the world."
Other funds from the Middle-East and Asia are scrambling to join one
of the consortia to bid for Thames.
Funds looking to tie up with investors may also include investment
vehicles owned by the governments of countries such as Singapore or
Dubai. Among trade bidders interest could be more limited.
Regulatory issues are likely to limit interest from existing British
water companies, which are not allowed to buy each other, and even
Macquarie would have to find a way of hiving off its existing UK
water business if it buys Thames. The Australian bank owns South
Scottish and Southern Energy, which generates, distributes and
supplies power and also owns gas pipelines, has received an
information pack but is unlikely to make an offer for the business,
the sources said.
RWE has said it is considering a market flotation of Thames,
Britain's biggest water supplier which provides water to 13mn people
and sewerage services to 8mn in and around London.
Deutsche Bank and Goldman Sachs, which are running the sale for RWE,
are also going ahead with the initial public offering process - due
to culminate around November - while they consider bids for the
The businesses being hived off include both the regulated assets and
unregulated operations, the sources said.
Terra Firma has hired former United Utilities chief executive John
Roberts to lead its effort and is co-investing with other financial
Thames - which wants to limit the use of water in London because of
a severe drought - said in June annual profit rose 31%.
RWE bought Thames Water for 7.1bn euros in 2000, and it bought
American Water, which it also plans to sell or list, for 4.5bn in
The German group aims to sell the water business to focus on its
more profitable electricity and gas operations, like its bigger
listed rival E.ON. - Reuters