A handful of local authority pension funds have teamed up with an investor in London’s new ‘super-sewer’ to bid for a stake in one of the UK’s biggest water suppliers.
Sky News has learnt that GLIL – a vehicle backed by council retirement schemes in London, Greater Manchester, Lancashire, Merseyside and West Yorkshire – is involved in a consortium vying for a 15% shareholding in Anglian Water Group.
GLIL has joined forces with Dalmore Capital to make an offer for the stake, which bankers believe could be worth as much as £500m.
The auction of the Anglian Water shareholding follows a string of similar deals in the UK water sector, and comes as the industry watchdog tightens its scrutiny of the balance sheets of companies it regulates.
Investors such as pension funds and infrastructure funds have long been attracted to the industry because of the guaranteed returns it generates.
In recent months, a number of minority stakes in Thames Water have changed hands, while in May, Affinity Water, which has 3.6 million customers, was sold for £1.6bn to an investor consortium.
It was unclear on Thursday whether the proposed bid from GLIL and Dalmore for the Anglian Water stake would be in addition to or instead of another offer from the Local Pensions Partnership reported by The Sunday Times last month.
Dalmore, which is an investor in the Thames Tideway project known as the ‘super sewer’, also owns a stake in National Grid’s gas distribution arm.
Anglian Water is jointly owned by Australian and Canadian funds, while the stake now being sold is held by 3i Infrastructure, a separately listed unit of the private equity group 3i.
Sources said that bidders for the 3i shareholding were being invited to make offers for the entire stake along with a seat on the Anglian Water board, or through a structure that could involve 3i continuing to manage the investment.
The stake is valued on 3i Infrastructure’s books at just under £300m, but is expected to command a price tag significantly higher than that.
Investors are continuing to pour money into the sector despite the threat of nationalisation raised in Labour’s manifesto before the General Election in June.
The sale of 3i Infrastructure’s Anglian Water stake is being handled by Royal Bank of Canada, with initial bids understood to be due next week.
3i and GLIL declined to comment.