Anglian Water Investor Signals Reluctance for Additional Funding

One of Anglian Water’s largest investors has indicated a reluctance to inject more capital into the struggling water sector and is now leaning towards opportunities in foreign utility investments. Local Pensions Partnership Investments (LPPI), which manages £27 billion of assets on behalf of local authority employees in London and Lancashire, expressed concerns regarding the current investment climate influenced by decisions from the water regulator Ofwat.

Chris Rule, chief executive of LPPI, remarked that they are uncertain about committing further funds to Anglian Water, indicating a belief that the water sector lacks the necessary appeal for investment at this time. The LPPI was established in 2016 to manage pensions for various local authority workers and oversees assets that are significant within the community. Its financial interests in Anglian Water are conveyed through GLIL Infrastructure, which collaborates with local government pension funds.

Currently holding a 7.5 per cent stake in Anglian Water, LPPI acquired this interest as part of a consortium in 2018. This investment was valued at approximately £580 million, signifying a notable commitment of local pension funds towards the water provider serving around six million customers in the east of England and Hartlepool.

Recently, Anglian Water has joined other water companies in appealing to the Competition and Markets Authority concerning Ofwat’s approval of bill increases capped at just 36 per cent over the next five years. Rule did not specify the necessary increases required but emphasised the importance of ensuring that any future investments yield a satisfactory risk-adjusted return.

While acknowledging that the government is urging regulators to adopt a more pro-growth stance, he articulated the challenges of navigating investment decisions within the water sector. Given the ongoing disputes between investors and regulators, LPPI may increasingly seek stable regulatory environments beyond the UK, with an eye towards a more predictable investment climate.

This shift in sentiment highlights the growing unease among private investors regarding the prospects of the domestic water industry and underscores the complexities within regulatory frameworks currently influencing investment decisions.