Macquarie Bank took another large step further into international infrastructure leadership overnight when it led the consortium that won the Thames Water auction, valuing the UK’s largest water and sewage company at eight billion quid.

As the Macquarie announcement says, Thames provides drinking water to eight million people and sewage services for 13 million.

The company was sold by German utilities giant RWE AG which wants to concentrate on energy with the 4.8 billion pounds it is receiving for Thames, which carries 3.2 billion pounds in debt.

The Macquarie consortium’s main opposition was the Qatar Investment Authority. The key to it being prepared to pay the top quid is an appreciation of how Thames can be paid for its services.

Unlike the standard Australian-style regulated utility receiving a percentage of the capital value of the assets, Thames can be paid more for improving the efficiency of the service. Fix all those thousands of miles of old leaky Thames pipes and you can earn European environmental greenie points – and money.

Just as the MacBankers realised the upside of owning the right sort of airport monopolies ahead of the pack and were prepared to pay more for them, they believe they’ve hit a jackpot in English water and muck.

And it looks like the market agrees. The consortium was led by Macquarie’s European Infrastructure Funds but Macquarie Bank itself will outlay $250 million for an 11 per cent equity stake. MacBank shares were up 80 cents in the first hour of trading to $71.30.

Peter Fray

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