Industriens emerges as largest backer of Southern Water deal

Industriens Pension has emerged as the largest single backer of Hermes Investment Management’s acquisition of a 17% stake in UK utility Southern Water.

The Danish pension provider contributed DKK1.1bn (€147m) to the deal, which came about after the Future Fund, Australia’s sovereign wealth fund, decided to sell its stake in the utility, allowing Hermes to grow its shareholding to 21%.

Kasper Struve, the provider’s director of private investments, confirmed the acquisition.

“Yes, it’s correct that we have invested roughly £120m (€155m) in Southern Water as a client of existing shareholder Hermes,” he said.

“It is a sizeable and important investment for us, and it is a sector we have followed for a number of years. Southern Water is a high-quality piece of UK infrastructure.

“We are happy to gain exposure and plan to hold the investment long term.”

Struve declined to say how large a stake in Southern Industriens had acquired for its DKK1.1bn contribution, but it is thought the provider is Hermes’s single-largest backer.

The last full sale of Southern, in 2007, saw Royal Bank of Scotland offload the company for £4.2bn to a group led by JP Morgan.

As a result, Industriens has grown its infrastructure holdings to 10% of assets under management, including stakes in offshore wind, hospitals, solar power stations and container terminals.

Detailing the provider’s strategy, which saw it win the award for best infrastructure strategy at the IPE Real Estate Global Awards in Amsterdam earlier this month, Struve said: “Direct investments are something we do in the core space – in addition to Southern Water, we have so far invested in seven PPP projects and two offshore wind parks.”

Its other UK exposure includes a co-investment in the UK’s Central Area Transmission System, a gas pipeline and a gas terminal in the North Sea maintained by Wood Group on behalf of Antin Infrastructure Partners. In 2015, Antin acquired a 62% stake for £302m.

It also includes an indirect stakes in the public/private partnership to build London’s Thames Tideway Tunnel, which also attracted a number of UK pension investors, and Angel Trains, in which PensionDanmark also acquired a stake.