Private equity group pays discount price for Yorkshire Water stake
EQT bought joint control of UK utility in deal worth less than the value of its regulated assets
Private equity group EQT snapped up a stake in strained utility Yorkshire Water last month at a steep discount, underlining the trials facing UK water companies at a time when Thames Water is fighting off renationalisation.
EQT paid less than the value of Yorkshire’s regulated assets when it bought shared control of the water company from Deutsche Bank’s asset manager, according to three people familiar with the matter, far less than the sector’s historical average.
EQT’s purchase valued Yorkshire Water’s parent company Kelda Holdings at £9.4bn, equivalent to 90 per cent of the company’s regulatory capital value, according to the people.
The previously undisclosed price demonstrates how the crisis at Thames Water, the industry’s high debt levels and political backlash against sewage pollution have hit valuations across the sector.
Yorkshire Water, which has 5.7mn customers in northern England, is under close watch by regulator Ofwat, which warned last year that it was “lagging behind” on pollution.
Ofwat demanded the company repay a £600mn loan amid concern about its finances and EQT agreed to contribute to the loan’s repayment as part of the deal.
Tim Whittaker, who directs infrastructure and private assets research at Edhec Business School, said EQT had achieved a “significant discount” with the deal. “[The sector] has a stink around it, so people are not investing as much,” he said.
In the 30 years to 2024, Ofwat data show that listed water companies were valued on average 10 per cent higher than their regulatory capital value — the asset base on which they are allowed to earn a set return through customer bills.
Between 2017 and 2024, stakes in UK water companies sold at a 36 per cent premium to their regulatory capital values, according to a court filing in a Thames Water case.
But EQT’s deal for a 42 per cent stake in Yorkshire also demonstrates continuing interest in the sector despite big shareholders in Thames Water previously declaring the largest water utility “uninvestable”. Lenders to Thames Water have been trying for more than a year to agree a deal with the regulator to avoid renationalisation.
“It’s a sector where the Thames Water backdrop has been challenging for a number of investors to get their heads round,” said a person familiar with the Yorkshire deal.
The private equity group had sought “a price that reflects the challenges” facing the sector after years of under-investment. A decision to allow some water companies to raise bills by more than half between 2025 and 2030 was a key factor in EQT’s decision to buy into the sector, the person added.
EQT, Deutsche Bank and Yorkshire Water declined to comment.