Thames Water removed from $290bn global infrastructure index

Thames Water has been removed from Infra300, the US$290bn (€265bn) global index that tracks an investable universe of private infrastructure assets.

Scientific Infra & Private Assets (SIPA), which runs the index of 300 infrastructure assets in 20 countries, said the removal of the troubled UK utilities company took effect at the beginning of July.

SIPA, which is part of the EDHEC Infrastructure & Private Assets Research Institute, said uncertainty over Thames Water’s “ability to operate as a private infrastructure business under current and anticipated regulatory conditions” led to a “comprehensive review” of its inclusion in the index.

Thames Water has recently placed into special measures by UK water regulator Ofwat, has billions of pounds in outstanding debt and could face nationalisation in the future. It has also been restricted in its ability to raise the prices to help fund investment in its infrastructure.

By 30 June 2024, Thames Water’s market capital, as reported by SIPA’s InfraMetrics, had plummeted by 51.8% compared with the previous quarter.

Frederic Blanc-Brude, CEO of SIPA, said the decision to remove Thames Water “was not taken lightly”, as the company had been included in the list since the inception of the index 24 years ago.

“However, given the increasing regulatory uncertainties and challenges facing the company, the SIPA index committee wanted to ensure that the infra300 continues to represent the private infrastructure investment universe,” he said.

Thames Water will be replaced in the index by UK Power Networks, an electricity distribution network operator that covers London, South East and East of England.

SIPA said UK Power Networks had “demonstrated strong operational performance, regulatory compliance and resilience, making it a highly suitable addition to the index”.

UK Power Networks has a turnover of more than £2bn (€2.38bn), £15bn in total assets and generated £600m in profit in 2023.

Blanc-Brude said: “UK Power Networks is a suitable replacement in the UK and corresponds to the same segment [IC80, Network Utilities] in the TICCS classification of infrastructure companies.”

SIPA said that replacing Thames Water with UK Power Networks would not alter the representation of the flagship infra300 Index, which is equal-weighted.

On a value-weighted basis, the weight of network utilities (IC80) in the infra300 is expected to increase by approximately 2.3%. SIPA said it would “continue to monitor the regulatory landscape and make adjustments as necessary to maintain its commitment to representing the investible universe of unlisted infrastructure companies”.

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