Southern Water shareholders are taking the hit for a £90m (€105m) fine imposed on the UK utility for illegal discharges of sewage following the Environment Agency’s prosecution, according to the firm’s CEO.
The sentence, announced late last week, follows 51 guilty pleas to widespread and long-term breaches of environmental law by Southern Water between 2010 and 2015. Last week, Southern Water CEO Ian McAula said the sentence would “not impact customers’ bills” and “shareholders are bearing the cost of the fine”.
A consortium of infrastructure funds, pension funds and private-equity investors own Southern Water through Greensands Holdings, managed or represented by JP Morgan Asset Management, UBS Asset Management, Hermes Investment Management and Whitehelm Capital. Hong Kong-based Cheung Kong Infrastructure and The Li Ka Shing Foundation are direct investors.
A spokesperson for Hermes Infrastructure said: “We note the fine issued to Southern Water and we remain disappointed with the historical failings of the company. Since we increased our holding in 2016 on behalf of new third-party clients, from a less-than-4% minority shareholding, we are pleased that the company has, with our support, implemented significant changes in the way that it operates, incurring incremental investment and adopting new operational and governance arrangements.
“As a responsible investor, we continue to work with the senior management at Southern Water and co-shareholders to deliver a resilient water future for the South East.”
Whitehelm said the Southern Water investment was a minority-stake investment and as such Whitehelm’s influence was limited. “Whitehelm typically seeks to take larger stakes in businesses where possible across its European Infrastructure assets”, the company said.
UBS and JP Morgan declined a request for comment.
“I am deeply sorry for the historic incidents which have led to today’s sentencing and fine,” McAula said in a statement following the sentence. “I know that the people who rely on us to be custodians of the precious environment in southern England must be able to trust us. What happened historically was completely unacceptable and Southern Water pleaded guilty to the charges in recognition of that fact.”
McAula, who joined Southern Water in 2017, said the company has changed the way it operates.
“My expectation is that Southern Water is fully transparent and operates in the right way. We continue to transform across the areas of risk and compliance, measurement and self-reporting.
“We have made much progress and are continuing to invest to protect the environment and deliver our services safely and at a fair price for our customers.”
To read the digital edition of the latest IPE Real Assets magazine click here.