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A new infrastructure investment fund with a $100 million stake in London utilities company Thames Water is to be floated on the NZX by Macquarie Bank.
The Business Herald understands that the Australian bank plans to float the company as a standalone entity that will eventually invest in
a range of utilities and infrastructure assets.
The offer is expected to be launched in the next two weeks and will raise funds to cover its Thames investment.
A consortium led by Macquarie Bank paid £8 billion ($22 billion) for Thames Water in October last year.
The fund will be managed by local group EPIC Equity Partners - an investment vehicle of George Kerr, who is associated with the $2 billion Jacks Point development in Queenstown.
It will also have an independent board to ensure that the fund keeps to its mandate of investing in high-quality utility assets.
Macquarie Bank's role will be to float the company and source the initial investment in Thames Water.
Thames is Britain's largest water and waste water services company with more than 13 million customers. It operates 31,000km of water mains and 67,000km of sewers.
Macquarie already has a range of infrastructure funds listed on the Australian Stock Exchange. But New Zealand investors will be the first in the world - at a retail level - to get access to a stake in Thames as the Macquarie consortium is yet to float it via European or Australian-based funds.
As a locally listed and registered company, the fund will be able to use the new foreign investment tax regime and portfolio investment entity structure to gross a higher yield.
Investors in the New Zealand company would rank equally with Macquarie as shareholders in Thames.
British regulator Ofwat determines Thames Water's returns based on the capital it needs to keep the infrastructure working and the cost of that capital. Commentators describe it as a mature regulatory environment which provides a stable platform for investors.
Thames Water has been a relatively poor performer over the past year or so.
In the six months to September 30 late year, operating profits fell 17 per cent to £201.7 million ($566.5 million), on revenue of £713.8 million.
But Macquarie will be hoping for a similar transformation to the one it worked on a smaller English utility, South East Water.
Macquarie bought South East Water for about £386 million in 2003 and sold it last year for £665 million.
Funds managers were yesterday reluctant to comment on the proposal until they saw more details.
There was always a shortage of good investment opportunities so this was something worth taking a look at, said one who asked not to be named.
