A consortium led by Macquarie Asset Management (MAM) has announced an equity support package for Southern Water, totaling up to £1.2 billion. This package includes an initial £655 million of binding equity commitments and a potential further commitment of up to £545 million by December 2025. The investment is intended to fund Southern Water's extensive investment program for the regulatory period from 2025 to 2030.
Southern Water's investment plan aims to inject approximately £4,000 per household into the water and wastewater network and services over the next five years. This initiative is part of the company's largest growth investment program relative to its size in the sector.
The new equity injection will also aid in reducing Southern Water's legacy holding debt, thereby improving its financial resilience amid recent credit rating downgrades within the UK water framework.
The initial equity commitment does not depend on the outcome of Southern Water’s appeal to the Competition and Markets Authority (CMA). However, the final size of additional equity will be determined after further discussions with stakeholders regarding the 2025-30 business plan. MAM remains confident in Southern Water’s case before the CMA and supports government efforts to reform the sector for increased long-term investments.
Since acquiring Southern Water in 2021, MAM-managed funds and co-investors have already invested £1.65 billion into the company. With this new round of funding, total investments could reach up to £2.85 billion.
During their ownership since 2021, MAM’s investors have not received dividends from Southern Water, which has pledged that no dividends will be paid during this regulatory period either. Instead, returns will be reinvested into supporting its record investment program.
Under MAM's guidance since 2021, Southern Water has made significant progress with its Turnaround Plan—reducing pollution incidents by around 40% and customer complaints by about 80%. Other improvements include top-quartile performance in areas like water leakage and sewer flooding.
Recognizing a forthcoming increase in customer bills due to these developments after years of falling real prices, Southern Water has extended its social tariff and financial hardship scheme while exploring other ways to assist customers and stakeholders.
Martin Bradley, Senior Managing Director at Macquarie Asset Management stated: “This additional equity investment demonstrates our commitment to Southern Water and its management team, and our belief that the planned investment programme will deliver for its customers and the environment.”
He added: “Prior to our ownership, Southern Water had been through a challenging period... The new management team...has created a positive culture focused entirely on building a better company."
Bradley emphasized that despite potential challenges associated with such a large-scale project: "We believe it will create real benefits felt by communities."
With investor capital backing them up financially during difficult times raising private sector capital for UK water companies; they align themselves with governmental ambitions towards sector reform aiming at achieving necessary resets needed effecting long-term changes desired across board levels alike!