Investment funds seen getting up to $3.6 bln in Kelda stake sale

Fri May 3, 2013 8:12am EDT
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By Anjuli Davies and Sophie Sassard

LONDON May 3 (Reuters) - Infracapital and Citi Infrastructure could reap up to 2.3 billion pounds ($3.6 billion) from the sale of a 30 percent stake in Kelda Group, which controls Yorkshire Water, bankers specialising in utilities said.

Infracapital, the infrastructure arm of UK fund manager M&G Investments, is divesting its entire 13 percent stake, and Citi Infrastructure Investors is selling 17 percent of its 37 percent, people familiar with the matter said. The investment funds have mandated Macquarie to manage the deal.

Yield-hungry investors have been showing strong interest in British water and sewerage firms as they seek stable cash flows and a favourable regulatory structure.

Yorkshire Water's parent company could be worth 6 billion to 6.8 billion pounds based on a 15 to 30 percent premium above the 2012 regulated asset base of 5.2 billion pounds, the bankers estimated. The 30 percent stake could, therefore, be worth up to 2.3 billion pounds.

Bankers cited previous deals such as for Northumbrian Water and the UK business of France's Veolia Environnement to estimate the potential premium.

Infracapital, Citi Infrastructure Investors and Macquarie declined to comment.

Yorkshire Water, the fifth-largest UK water and sewerage company, serves 4.7 million people and 130,000 businesses in Yorkshire.

Possible buyers include Beijing Water Authority, which could be interested in Yorkshire Water after it lost Sutton and East Surrey Water to Japan's Sumitomo, the sector bankers said.   Continued...