On 3 October 2011 Alinda, which also owns South Staffordshire Water plc, acquired Cambridge from HSBC bank.
In August the bank bought Cambridge Water from CKI UK Water Limited in a deal which valued the business at £74.8 million. Ofwat subsequently launched a consultation inviting views on a number of issues, including the capacity of HSBC to be the owner of a regulated water business. The regulator said at the time that it was HSBC’s intention to be a short term investor in Cambridge and that HSBC had indicated it would act as a responsible custodian but would eventually sell Cambridge to an appropriate long term investor.
The Alinda Capital Partners LLC purchase means the deal has now been referred by the Office of Fair Trading to the Competition Commission. Under the Water Industry Act 1991 special merger regime for mergers between water and sewerage companies, the OFT must refer a merger of two or more water businesses in England and Wales with individual turnovers of £10 million or more to the Commission - a process which can take up to six months.
Ofwat has now said it will continue with the licence proposals it originally set out following the purchase. However, it may need to revisit whether any regulatory issues arise as a result of the deal in the light of any eventual conclusion by the Commission.
Issues arising in response to the HSBC consultation
Responses to the consultation included support for the proposed licence modifications from the Consumer Council for Water. However, Martin Blaiklock, an infrastructure and energy consultant, opposed the acquisition. His primary concerns were that HSBC’s investment was temporary and Cambridge’s current financing is with short term debt in a long term industry. He also raised a suggestion to limit a company’s gearing level.
Cambridge has now agreed with Ofwat’s proposal to amend Cambridge’s Appointment Condition P which relates to the role of the Appointee’s Ultimate Controller and UK holding company to bring it into line with the current standard.
Ofwat said it can see no reason to challenge the view that new owner Alinda is the appropriate entity to provide the Condition P Undertaking – deadline for further comments on the proposed modifications is 25 November 2011.
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