China's sovereign wealth fund has bought a minority stake in Britain's largest water and sewerage firm, a deal that reflected China's rising interest in Europe's utility assets.
China Investment Corporation (CIC), which manages the US$410 billion fund, said on its website yesterday that one of its subsidiaries had acquired an 8.68 per cent stake in Thames Water, a closely held utility dealing with public water supply in London. The investment amount was not disclosed.
The investment followed recent remarks by CIC chairman Lou Jiwei that CIC would be interested in investing in infrastructure assets in Britain and other Western economies.
British finance minister George Osborne, who met with Vice-Premier Wang Qishan during a visit to Beijing earlier this week, said yesterday the stake purchase showed 'a vote of confidence in Britain as a place to invest and do business'.
The deal is part of CIC's active investments in infrastructure projects in developed economies.
CIC president Gao Xiqing said last month that the fund was eyeing more than 10 major infrastructure projects in developed countries for possible investment.
'The purchase of the Thames Water stake shows CIC's intention to seek more lucrative deals in Europe, since prices of the assets look reasonable due to the euro-zone debt crisis,' said Howhow Zhang, head of research at fund consultancy Z-Ben Advisors. 'It is also a sign that CIC will aggressively make investments in the near future.' In December, CIC agreed to partner Singapore's Global Logistic Properties to buy 15 logistics facilities in Japan for US$1.6 billion, and said it planned to spend about US$250 million to take a 25 per cent stake in South African investment firm Shanduka.
Chinese economists recently called on Beijing to seize investment opportunities in Europe, as some of the distressed assets were being valued attractively.
During his visit to Beijing, Osborne promised to promote Chinese investments in Britain's infrastructure assets.
Thames Water, owned by Kemble Water, a consortium of institutional investors, has 4,500 employees and 14 million customers.
According to CIC's annual report for 2010, which was released last July, the fund had limited idle cash for new investments and it was waiting for new funding from Beijing to support further acquisitions.
A person with knowledge of CIC's operations said the sovereign fund had received an additional US$40 billion from Beijing to replenish its war chest.