Macquarie Asset Management Acquires Majority Stake In Southern Water

Macquarie Asset Management, one of the largest investors in the UK, has announced that it has now acquired a majority stake in Southern Water, with the company set to invest more than £1 billion in new equity to recapitalise the water supplier and bring in a more sustainable financing strategy.

Southern Water itself provides services to 2.6 million water and 4.7 million wastewater customers throughout Kent, Sussex, Hampshire and the Isle of Wight, and this injection of capital will enable the company to make significant investments to upgrade it network, with £2 billion due to be invested over the coming four years to fix pipes, pumping stations and sewers.

One of the outcomes of this new takeover is that the zero-tolerance mindset towards environmental pollution will be strengthened, with a commitment made to improve Southern Water’s environmental track record significantly.

Back in July, the water supplier was fined a record £90 million after it was discovered that it had been deliberately discharging between 16 billion and 21 billion litres of raw sewage into protected marine environments over several years in order to make financial gains.

The Environment Agency investigation into the matter was the biggest ever undertaken by the organisation, uncovering “widespread criminality” over a period of nearly six years, criminality that was acknowledged even at the very top level of the company.

Macquarie Asset Management is now introducing plans to reduce pollution incidents by over 50 per cent compared to incidents in 2019 over the next four years. It also intends to further reduce water leaks across the network via an investment programme that includes around £230 million of funding to make infrastructure upgrades.

Leigh Harrison, head of Macquarie infrastructure and real assets, said: “Southern Water needs significant investment to improve its operational and environmental performance, and financial health. Without it, the business will be unable to fulfil the expectations of the millions of customers that rely on its services each day or reduce its negative impact on the local environment.

“This major £1 billion equity investment by one of our long-term infrastructure funds will help put Southern Water back on a stable footing and enable an ambitious multi-year transformation plan to make essential water and wastewater services in the South East of England more sustainable and resilient.”

Other work due to be undertaken includes ensuring affordable customer bills, with a commitment to make sure that these do not rise by more than inflation, as well as honouring an existing £123 million customer rebate because of historical incidents.

And customer service standards are set to be improved. Currently, customer service at Southern Water is the second-worst performing in the UK water sector and this is now due to be addressed.

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