Qatari sovereign wealth fund takes £200m stake in Severn Trent
QIA has pumped billions of pounds into UK real estate and infrastructure in recent years
Qatar’s sovereign wealth fund has taken a £200m stake in Severn Trent, one of the UK’s biggest water companies.
Severn Trent is among the largest of the UK’s 10 regional water supply and sewerage monopolies, serving about 8m people in Birmingham, Gloucester and the Bristol Channel area. It is one of three water companies listed on the London Stock Exchange, while the others are owned mostly by overseas investors, including sovereign wealth and private equity funds.
The opposition Labour party has set out plans to renationalise UK water companies should it win a general election. Shadow chancellor John McDonnell has said a Labour government would pay less than £15bn to investors when it renationalises the industry, compared with an estimated £44bn market value of their investments.
The Qatar Investment Authority has nevertheless pumped billions of pounds into UK real estate and infrastructure in recent years. Its decision to invest in Severn Trent follows its purchase of a 3.3 per cent stake in Sirius Minerals, the London-listed company building a giant fertiliser mine under a national park in North Yorkshire.
In 2006, the QIA failed in a £7bn takeover bid for Thames Water after being outbid by Macquarie, which exited the UK’s largest water company in 2017. Macquarie sold its stake for an estimated £1.35bn to Omers, the Canadian pension fund, and the Kuwait Investment Authority.
The UK water industry is under pressure from across the political spectrum for excessive payouts to shareholders and executives. On Friday, Thames Water’s chief executive, Steve Robertson, was fired with immediate effect for poor performance ahead of a report by the regulator due in July.
Severn Trent has been criticised for making Liv Garfield, its chief executive, one of the best paid bosses in the industry — Ms Garfield earns more than £2m a year. Last month, the company was fined £500,000 for discharging thousands of gallons of raw sewage from its sewer network on to a park in the West Midlands. At the same time, the company has pledged to increase dividends each year by the retail price index inflation plus 4 per cent — and last week it confirmed an 8 per cent dividend rise for shareholders, including Lazard Asset Management, BlackRock Investment Management and Legal & General.
Other water companies, including Yorkshire Water, which supplies water and sewage services to around 5m people and 130,000 businesses, have struggled to attract investment in recent years. Two of Yorkshire Water’s investors — Deutsche Asset Management and the private equity fund Corsair Capital have failed to find buyers for their combined 55 per cent stake since putting it on the market in 2017.
Severn Trent declined to comment.
Equity trade remained extremely sloppy this week as the growing tension between the US and China hung over markets. Huawei remained ground zero for the trade war as rhetoric around the controversial Chinese telecom name mushroomed. The White House was said to be considering an expanded black list of Chinese companies while reports circulated that China could retaliate against US tech companies or use its rare earth monopoly as an asymmetrical pressure tactic.
By the week’s end, some analysts saw the seeds of a new Cold War splitting the world between two economic and technological blocs.
Brexit uncertainly also continued to drag on sentiment as PM May made one final gambit to gain support for her withdrawal bill. By Friday, the broad-based rejection of her new Brexit offer to Parliament forced her to step aside and begin the process for finding a new Conservative leader.
More weak manufacturing and business confidence data reignited uneasiness about the potential for recession across
For the week, the S&P lost 1.2%, the DJIA dropped 0.7%, and the Nasdaq gave up 2.3%.
In corporate news this week, Sprint and T-Mobile reached a deal with the FCC for merger approval, but hurdles still remain from potential antitrust action at the Justice Department or from state attorneys general. Home Depot slipped after announcing that weak lumber prices and bad weather weighed on its Q1 results. Kohl’s missed expectations on earnings and its outlook, while JC Penney’s same store sales fell 5.5%, well below consensus. Lowe’s shares plummeted after it reported an EPS miss amid gross margin contraction, while Target jumped after seeing strong SSS and traffic in Q1.
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