Labour nationalisation fears have ravaged UK utilility shares – but aptly-named Hong Kong billionaire is…Ka-shing in as Corbyn plots power grab
Hong Kongs richest family has extracted almost £1 billion in dividends from British water, energy and rail firms over the past two years, an investigation by The Mail on Sunday has found.
The family of Sir Li Ka-shing, who was knighted by the Queen in 2000, controls a string of five infrastructure firms supplying gas, electricity and water to British homes. Its trains are used by some of the country’s largest rail operators.
Documents filed in Britain reveal that the dividends paid to Li Ka-shing’s parent company – CK Hutchison Holdings – amount to a significant proportion of the £2.6 billion pre-tax profits made by the five firms over the same period.
Power brokers: Head of the empire Victor Li, left, with his father Li Ka-shing
In total, the five companies paid out £427 million in dividends to CK Hutchison Holdings and related companies last year and £541 million the year before. This equates to 37 per cent of the pre-tax profit overall.
Three of these companies – Wales & West Gas Networks Holdings, Northumbrian Water Group and rail leasing firm Eversholt Rail Leasing Limited – handed out dividends which exceeded the annual profits.
Other companies controlled by CK Hutchison Holdings, in which the Li family owns a 30 per cent stake, include UK Power Networks, which operates in the East of England, and Northern Gas.
Energy network companies, which look after the cables and pipes that transport gas and electricity to homes, came under intense scrutiny last week after it emerged that the Labour party is planning to renationalise them along with water firms. Gillian Guy, chief executive of Citizens Advice, said: ‘Customers have been overcharged for the gas and electricity energy networks for too long. We estimate £7.5 billion since 2013. It’s an unfair system that means people’s bills remain unnecessarily high.’
Li Ka-shing, who was knighted for services to British industry and medical research, is one of the most influential businessmen in Asia. In the 1950s, he set up Cheung Kong Holdings which later became CK Hutchison Holdings.
The company is based in the Cayman Islands and its stock is traded on the Hong Kong stock exchange.
Li Ka-shing retired from the day-to-day running of his business last year aged 89 and his son Victor Li Tzar-kuoi took over as chairman last May. Victor Li made headlines when he was kidnapped in 1996 by gangster Cheung Tze-keung, who was known as Big Spender. Li Ka-shing paid a ransom of HK$1 billion and Cheung was executed in China in 1998.
CK Hutchison Holdings has steadily acquired infrastructure businesses in the UK and also owns mobile operator Three. The huge payments to the Li family emerged after a separate probe by The Mail on Sunday earlier this month found Britain’s four independently owned electricity network companies paid their foreign owners close to £2 billion from 2014 to 2018.
WATER AND ENERGY GIANTS SUFFER £2.5BN SLUMP
Threats to nationalise water utilities and gas network companies have wiped more than £2.5 billion off their value over the past two weeks.
Water companies Severn Trent, United Utilities and South West Water owner Pennon slid after speculation that Jeremy Corbyn’s Labour party aims to seize assets.
Then last week the value of National Grid and energy giant SSE was hit by the party’s report Bringing Energy Home, a plan to renationalise energy networks which was launched by Shadow Business Secretary Rebecca Long-Bailey.
Energy Networks Association chief executive David Smith said the plans would be ‘costly to the public’.
Li Ka-shing’s UK Power Networks emerged as one of the highest dividend payers, handing out £800 million over the period – all of which trace to CK Hutchison Holdings. UK Power Networks also paid £77 million a year in interest on shareholder loans.
The company said the dividend paid for the year ended March 31, 2018, of almost £200 million ‘should be considered in the context of the £3.4 billion capital invested by the shareholders’. It added: ‘This represents a return of 5.8 per cent.’
Northumbrian Water said it ‘operates in a highly regulated environment’ and ‘our rate of return to our shareholders is in line with regulatory determinations and also a result of the sustained high levels of performance achieved by the company’.
It added: ‘Our bills are amongst the lowest in the country and we have committed to lowering them further by circa 14 per cent from 2020.’
Northern Gas said it has invested £3.2 billion since it was acquired in 2005 and that the dividend payment was ‘in line with the expectations of the regulatory framework’ because in 2018 it was 3.75 per cent of the £2 billion investment.
Wales & West said its dividend was ‘lower than permitted under Ofgem’s regulatory framework’ which allows a return on capital invested of up to 6.7 per cent for the best performers. It said the £34 million it paid in the year to 2019 was 1.3 per cent.
Eversholt Rail Leasing Limited – which leases trains to 12 operators including Govia Thameslink – declined to comment.