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Opinion

UK infrastructure assets: Water works

The price that Macquarie was prepared to pay for Thames Water graphically illustrates the impact that infrastructure funds are having on this sector.

It seems hard to believe now but when RWE first revealed its plans to sell UK utility company Thames Water, private equity interest in the deal was expected to be limited. Although the deal was classic Terra Firma-type territory (and the Guy Hands-led firm fought hard for the mandate), similar bidders were expected to be thin on the ground. The fact the firm ended up in a fierce bidding war with two infrastructure funds, the Qatar Investment Authority and an Australian energy company is a stark illustration of just how hot a market UK infrastructure assets have become. RWE eventually sold Thames Water to Macquarie’s Kemble Water consortium for £8 billion ($15 billion) on October 16, which is an astonishing book gain of around €500 million for RWE.

This is becoming a familiar story: BAA, Associated British Ports, London City Airport and now Thames Water have all recently been sold to eager buyers. But the price paid for Thames (which is a full 27% premium to the regulated asset base) really underscores the impact that the interest in the sector and rapid growth in the sheer number of infrastructure funds is having on this sector.

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