Two of Sweden’s national pensions buffer funds have been stung with losses as a result of their exposure to the troubled UK water company Thames Water.
Documents on the website of AP1, one of the five state buffer funds backing Sweden’s first-pillar income pension, show that an unlisted investment in Omers Farmoor 3 Holdings – stated as being worth SEK1.19bn (€101m) at the end of December 2023 – was written down to a value of zero by the end of June.
The investment vehicle is a Netherlands-registered entity that holds 4.36% of Kemble Water Holdings, the holding company of Thames Water, the UK’s largest utility.
Thames Water, in trouble with the regulator over its poor environmental record, has been in a funding crisis for some time and faces an uncertain future.
In May, Thames Water’s biggest shareholder with a 31.8% stake, the Singapore-registered subsidiary of Ontario Municipal Employees Retirement System (OMERS), said it would make a full writedown of its investment.
Bloomberg reported yesterday that Queensland Investment Corp, which owns 5% of Thames Water’s parent company, has now written off its investment.
OMERS’s stake in the utility company is held by multiple holding companies including Omers Farmoor 3 Holdings.
AP3, another of Sweden’s main four pensions buffer funds, which had nearly SEK500bn in total assets at the end of last year, also appears to have had a significant investment in the OMERS vehicle, with a holdings list on its website stating exposure to “Farmoor” as having been worth SEK1.9bn at the end of 2023.
AP1, which recently reported total assets of SEK476bn, is the only one of the big four buffer funds to have reported its first half results for 2024 so far – and its interim report revealed it suffered a 20.1% loss on infrastructure investments in the six months.
Asked last week to explain the loss, a spokeswoman for AP1 told IPE: “Infrastructure investments require a long-term horizon, and are therefore suitable for pension funds to invest in, but they are also often impacted by political decisions and regulations, which entail risk.”
She also said it was important to note that AP1’s infrastructure holdings constituted a very small part of the fund’s total portfolio, at 1.36%.
AP1’s spokeswoman declined a request for further comment and AP3 declined a request for comment on Thames Water investments.
At the beginning of this month, Thames Water was removed from the global index Infra300, with Scientific Infra & Private Assets (SIPA) – which runs the index – saying that uncertainty over the utility’s “ability to operate as a private infrastructure business under current and anticipated regulatory conditions” had led to a comprehensive review of its inclusion in the index.
UK water regulator Ofwat recently placed Thames Water into special measures, with the company billions of pounds in debt and facing possible nationalisation in the future.
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