Invested 2006 - 2017
Ownership at entry 48%
Ownership at exit 26%
Location United Kingdom
Modernising Victorian-era infrastructure
Rapid industrialisation and population growth during the early 1800s put pressure on the River Thames, with sewage from approximately two million Londoners emptying into the city’s main water source. Following the ‘Great Stink’ of 1858, Londoners invested in the city’s first modern sewerage system and expanded the clean water supply system – installing an extensive network of cast iron mains to connect homes across the city to clean drinking water and sewerage services.
Thames Water was privatised in 1990 after more than a century under public ownership. By this point, the Victorian installations continued to form a core part of London’s water and wastewater network and Thames Water was struggling to keep pace with required investment levels.
The combination of private ownership and a transparent regulatory framework resulted in a considerable increase in investment in the network. However, on acquiring Thames Water in 2006 it was clear that a material step up was required. To prepare Thames Water for the next chapter in its history, MAM and its co-shareholders set in motion a programme to significantly increase investment in the network.
Location United Kingdom
This strategy saw an average of more than £1 billion invested each year between 2006 and 2017 to maintain, upgrade and expand the network. With investment levels three times higher than when Thames Water was under public ownership1, almost double than when it was a listed company2 and significantly higher than when it was owned by a multi-utility3, the business was able to begin critical upgrades to improve operational performance.
The Victorian mains replacement programme saw some of the network’s oldest and leakiest cast iron mains replaced – reducing leakage rates by approximately 22%4. This initiative, combined with the construction of the UK’s first desalination plant, resulted in a significant increase in security of supply for Thames Water customers5.
The increased investment levels also allowed Thames Water to complete vital capital works needed to improve wastewater management services. The utility invested in its sewage treatment capacity, including the expansion of facilities at Beckton to create one of Europe’s largest sewage treatment works6. The delivery of the Lee Tunnel in 2016 also improved the health of London’s river systems – avoiding more than 16 million tonnes of sewage flowing into the Thames Tideway each year.
Focused on Londoners
At the time of MAM’s initial investment, Thames Water had expanded into business lines outside its core focus, including transport maintenance services, real estate and international markets. MAM partnered with the utility to divest non-core areas of the business – helping management focus on the provision of efficient water and wastewater services to the people of London and the Thames Valley.
Thames Water customers also benefited from some of the lowest water bills in the UK. Despite investment levels per customer being among the highest in the industry, their bills were the third-lowest in England and Wales7. Drinking water quality was also consistently maintained amongst the best in the industry.8
Investing in stronger essential services
Martin Stanley, Macquarie Asset Management
For more information about our infrastructure capabilities, please contact us.
All information current as at 31 March 2019, unless otherwise stated.
1 Based on average annual investment of £323 million in the five years immediately before privatisation 1984 / 85 – 1988 / 89. ‘Our Finances Explained November 2018, Thames Water’.
2 Based on average annual investment of £580 million between 1989 – 2001. ‘Our Finances Explained November 2018, Thames Water’.
3 Based on average annual investment of £660 million between 2001 – 2006. ‘Our Finances Explained November 2018, Thames Water’.
4 Based on a reduction of leakage from 862 megalitres per day in 2005/6 to 677 megalitres per day in 2016/17.
5 Based on an increase in Security of Supply Index score from 22/100 in 2005/6 to 99/100 in 2016/17.
6 Based on total wastewater treatment capacity. Institute of civil engineers and Tideway.
7 Based on average annual customer bill of £374 in 2016/17.