RWE sells Thames Water to Kemble Water

SYDNEY Macquarie Bank, Australia's largest securities firm, said Tuesday that it would lead a group in buying Thames Water, a subsidiary of RWE, for £4.8 billion, or $8.9 billion, including debt, the third acquisition of a British water utility this month.
 
Macquarie Bank will acquire 11 percent of Britain's largest water-services company, with two funds managed by the Sydney-based bank and other unnamed investors holding the rest, Macquarie said in a statement. RWE, Europe's third-largest utility, is selling Thames to focus on gas and power markets.
 
Macquarie Bank, the world's largest private manager of infrastructure, has bundled more than $66 billion of assets into funds it oversees for investors. The Thames Water purchase is part of a record $151 billion of takeovers announced in Australia this year.
 
"The regular cash flows these assets generate enable Macquarie to put them into funds that investors will support," said Rob Patterson, a fund manager at Argo Investments. "They've missed a couple of deals lately, and it's good to see that they've got one, and this is a big one."
 
RWE, Europe's third-largest utility, will book a gain of at least "hundreds of millions" of euros, the Essen, Germany- based company said in a statement. The sale of Thames Water is expected to be finalized by the beginning of December.
 
Macquarie said buyers of Thames Water include closely held Macquarie European Infrastructure Fund and Macquarie European Infrastructure Fund II, both managed by the bank and which invest in ports, ferries and utilities.
 
RWE is selling Thames Water to buy gas and power assets as European Union energy markets open to full competition next year. Investors like Macquarie seek water utilities because they offer predictable earnings growth. 3i Group and partners last week raised their offer for AWG, the British owner of Anglian Water, to £2.25 billion to discourage rival bids.
 
"RWE did well to get this much," said Andrew Moulder, senior utilities analyst at Creditsights in London. "Now the question is what will it spend the money on."
 
RWE, Germany's largest power producer, has said it plans to invest the money from the sale in natural gas firms or power companies in Central and Eastern Europe.
 
"The sale of Thames Water is a significant step in the realization of our strategy to focus on our core business in the electricity and gas markets in Europe," RWE's chief executive, Harry Roels, said in a separate statement.

Thames Water supplies water to eight million people across London and the south of England, and provides sewage services to 13 million customers.

The group has drawn widespread criticism in recent months - particularly after it announced a 31% rise in pre-tax profits to £346.5m in June.

It attracted ire from regulators for missing its water leakage targets for the third time in a row, while consumers were angered by its decision to implement a hosepipe ban during the long, hot summer.

RWE, which also has interests in gas, electricity and recycling, bought Thames Water for £4.8bn in 2000.