Proactive Investors - National Grid (LON:NG) today agreed to sell a greater share of the UK's gas transmission and meter network to Australia's Macquarie. Or put another way, the 'vampire kangaroo' owner of Thames Water will soon own 80% of a key national infrastructure asset.
Yes, the same Thames Water that was recently on the brink of collapse and requiring an emergency nationalisation.
The same Thames Water that regulator Ofwat warned has "significant issues to address" around its financial health and operational performance, which sparked wider concerns among other utilities about the longer-term debt burdens.
The same Thames Water where in 11 years as majority owner up to 2017 was estimated to have paid out over £2.7bn in dividends as debts were loaded up against its assets, hiking borrowing from £3.2bn to almost £11bn – and since rising to around £14bn now, representing 80% of the company’s regulatory capital value.
During its ownership by Macquarie, the pension deficit grew from £18mln to £380mln.
Macquarie also owns the UK gas distribution network, Cadent Gas, where it has also been attacked for trying to stop pension schemes, along with Glasgow airport, fibre broadband provider KCOM and several windfarms.
As for performance, Thames Water has been fined for river pollution, conveniently for Macquarie this was just weeks after it sold its final stake, though representing a period when the Australian infrastructure investor was in charge.
Many of the 15bn customers of Thames Water and those who use the rivers in its domain (London, the home counties, Oxfordshire, Wiltshire and more) may have had mixed feelings after Macquarie became the majority owner again in 2021 as part of an earlier £1.1bn funding round, and contributed another £550mln as part of the rescue package arranged earlier this month.
The latest troubles prompted credit agency Fitch to downgrade its rating of Thames Water's debt, which means shareholders will not currently be able to pay themselves dividends, as well as limiting how much more debt can be loaded up.
Macquarie and other investors had committed to a dividend yield of under 4% over four years as part of the 2021 deal.
Macquarie Asset Management had A$871bn (£457bn) in assets under management at its financial year end in March, with the business contributing 23% of group profit, down by almost a quarter to A$2.3bn.
National Grid said today that the new sale, which also includes an option for the Australian company to buy the final 20% next year, will require regulatory clearance.
Clearance was given for last year's initial £4.2bn purchase by Macquarie of a 60% stake but Downing Street promised a review of the deal last August amid concerns about energy security.
The deal was eventually approved and was completed in January, so it remains to be seen if the regulator and government see things differently now.