The BT Pension Scheme has bought a 13 per cent stake in Kemble Water, the Thames Water holding company, from funds managed by Australian investment bank Macquarie.
The Scheme (BTPS) is now the second largest shareholder in Thames Water behind Macquarie, which still owns 26 per cent.
According to the Daily Telegraph, the BTPS said its “long-term liabilities to its pensioners are linked to UK inflation.” Therefore, the pension scheme is “seeking to increase its exposure to domestic infrastructure investments that have a natural linkage to UK inflation.”
It is not known how much the 13 per cent stake was sold for but it has been estimated in the past that an 8.7 per cent stake in Thames amounts to about £600m. The stake will give BTPS representatives at Hermes, who advised on the deal, a seat on the board.
Frank Naylor, Head of Strategy for BTPS Management, said:
"Thames Water is a well established business governed by a mature, transparent regulatory regime that should provide predictable inflation-linked cash flows over the long term."
The latest sale means that nearly a third of Kemble Water has been sold in the last six months, following the sale of 9.9 per cent to the Abu Dhabi Investment Authority in December 2011, and an 8.68 per cent stake to the China Investment Corporation in January this year.
The news comes after the CBI called for a huge investment in infrastructure, paying special attention to pension funds as a source of funding. It will be interesting to see whether more pension funds buy into UK water companies, with particular attention on Veolia’s UK water business, which is currently up for sale.
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