Qatar’s sovereign wealth fund has taken a £200m stake in Severn Trent, one of the UK’s biggest water companies.
Severn Trent is among the largest of the UK’s 10 regional water supply and sewerage monopolies, serving about 8m people in Birmingham, Gloucester and the Bristol Channel area. It is one of three water companies listed on the London Stock Exchange, while the others are owned mostly by overseas investors, including sovereign wealth and private equity funds.
The opposition Labour party has set out plans to renationalise UK water companies should it win a general election. Shadow chancellor John McDonnell has said a Labour government would pay less than £15bn to investors when it renationalises the industry, compared with an estimated £44bn market value of their investments.
The Qatar Investment Authority has nevertheless pumped billions of pounds into UK real estate and infrastructure in recent years. Its decision to invest in Severn Trent follows its purchase of a 3.3 per cent stake in Sirius Minerals, the London-listed company building a giant fertiliser mine under a national park in North Yorkshire.
In 2006, the QIA failed in a £7bn takeover bid for Thames Water after being outbid by Macquarie, which exited the UK’s largest water company in 2017. Macquarie sold its stake for an estimated £1.35bn to Omers, the Canadian pension fund, and the Kuwait Investment Authority.
The UK water industry is under pressure from across the political spectrum for excessive payouts to shareholders and executives. On Friday, Thames Water’s chief executive, Steve Robertson, was fired with immediate effect for poor performance ahead of a report by the regulator due in July.
Severn Trent has been criticised for making Liv Garfield, its chief executive, one of the best paid bosses in the industry — Ms Garfield earns more than £2m a year. Last month, the company was fined £500,000 for discharging thousands of gallons of raw sewage from its sewer network on to a park in the West Midlands. At the same time, the company has pledged to increase dividends each year by the retail price index inflation plus 4 per cent — and last week it confirmed an 8 per cent dividend rise for shareholders, including Lazard Asset Management, BlackRock Investment Management and Legal & General.
Other water companies, including Yorkshire Water, which supplies water and sewage services to around 5m people and 130,000 businesses, have struggled to attract investment in recent years. Two of Yorkshire Water’s investors — Deutsche Asset Management and the private equity fund Corsair Capital have failed to find buyers for their combined 55 per cent stake since putting it on the market in 2017.
Severn Trent declined to comment.