Specialist firm Macquarie Asset Management has reached an agreement to buy a majority stake in Southern Water and plans to reduce pollution incidents by more than 50% (compared to 2019) over the next four years
Under an agreement with existing Southern Water shareholders, Macquarie Asset Management will invest, on behalf of long-term investors, including pension funds and insurance companies, approximately £ 1 billion in new equity capital to recapitalize the business and implement a more sustainable financing strategy for Southern Water Eau.
The capital injection will allow Southern Water to make significant investments to modernize its network with £ 2 billion over the next four years of the current regulatory period. This will be used to repair pipes, pumping stations and sewers that are underperforming and harming the local environment.
The major investment program is equivalent to around £ 1,000 for each property in the Southern Water watershed and will be used to improve its operational and financial performance, financial resilience and customer relationships.
Macquarie Asset Management has consulted widely with Ofwat, the regulator of water and sanitation services in England and Wales. Macquarie Asset Management’s intentions and commitments to Southern Water for the remaining four years of the regulatory period until 2025 to accelerate its transformation include:
Strengthen zero tolerance to environmental pollution: A commitment to dramatically improve the environmental track record of Southern Water, which Macquarie Asset Management said was one of the worst performers in the UK water industry in 2019. The company is implementing plans to reduce incidents more than 50% pollution (compared to 2019 pollution incidents) over the next four years. There may be incidents, particularly in the next few years, but we anticipate very low tolerance for such events among the management and board of directors of Southern Water.
Reduce leaks: through Southern Water’s major investment program, a commitment to reduce the number of water leaks in accordance with Ofwat’s guidelines. The investment program includes funding of around £ 230million to modernize Southern Water’s infrastructure, which management considers essential to improve the quality and resilience of water and sanitation services, including minimizing and manage pollution incidents more effectively.
Guarantee affordable customer invoices: by 2025, a commitment to ensure that the average bill for water and sanitation customers, in total, does not increase more than inflation. This commitment is in addition to honoring an existing customer discount of £ 123million due to historical incidents.
Improve customer service: A goal of improving customer service for Southern Water, the second worst performing UK water industry, by addressing the root causes of complaints and improving Southern Water’s ability to deal with them more effectively.
In June, “unfiltered and untreated sewage” was dumped into the sea from the Foreness pumping station, spreading pollution to 11 beaches and bays in Thanet. Last week, pollution affected a section from Sheerness to Whitstable and Herne Bay.
The incident, which Southern Water said was caused by a lightning strike causing a power outage during a nighttime storm, meant the advice against entering the sea or the beach area below the High water leash remained in place for just over 6 days – finally lifted on June 23.
The Environment Agency is also investigating another release from Foreness on June 27. There have also been other combined sewer releases at Ramsgate and Broadstairs this month.
In July, Southern Water was fined a record £ 90million for illegally dumping raw sewage into the sea.
At a sentencing hearing at Canterbury Crown Court, it was heard the water company pumped around 16-21 billion liters of untreated sewage into protected waters around the south coast.
Southern Water faced 51 charges of sewage pollution that occurred between 2010 and 2015.
The case is said to be the largest ever initiated by the Environment Agency after sewage was discharged to the south coast from 16 sewage treatment plants and a sewer overflow.
Southern Water pleaded guilty to all offenses, admitting 6,971 illegal spills from sites in Hampshire, Kent and West Sussex over five years.
“Reduce the negative impact on the local environment”
Leigh Harrison, Head of Macquarie Infrastructure and Real Assets, said: “Southern Water needs significant investments to improve its operational and environmental performance, as well as its financial health. Without it, the company will not be able to meet the expectations of the millions of customers who rely on its services every day or reduce its negative impact on the local environment.
“This major £ 1bn 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 deliver essential water and water services. more sustainable and resilient sanitation in the south-east of England.
“While we anticipate that Southern Water will have made substantial progress in resolving its issues by the end of 2025, we recognize that the transformation of the business will take time and that is why we intend to hold our interest in Southern Water over several regulatory periods. “
£ 2 billion spent
Ian McAulay, CEO of Southern Water, said: “This is good news for our customers, the local environment and the regional economy. This investment ensures that we will be able to spend over £ 2 billion over the next four years to improve the resilience of our existing network to reduce pollution incidents and leaks.
“It strengthens our ability to meet the long-term challenges posed by climate change and population growth, while being the responsible steward of the rivers and seas of southern England. With the support of our shareholders over the long term, we are fully committed to protecting the local environment and providing the quality of service our customers deserve.
“It is important to note that this new investment will help Southern Water create approximately 1,000 new jobs and expand our apprenticeship program, thereby contributing to the economic recovery of our region as we fight the global Covid-19 pandemic. . “
The Macquarie Group has operated in the UK for over 30 years and opened its headquarters in London in 1989.