Thames sale completes Santander’s exit from water

Santander’s urgent need to boost core capital was behind the recent sale of its stake in Thames Water to China’s sovereign wealth fund China Investment Corporation.

The Spanish bank – which offloaded Chilean water utility Aguas Nuevas in 2010 – remains under pressure to monetise what assets it can without incurring losses, which rules out liquidating its domestic real estate holdings.

CIC is unlikely to have paid the widely reported £500-700 million for the 8.68% holding in Thames it acquired from Santander and Portugal’s Finpro, however. One senior industry analyst said that any stake in the Kemble holding company would be heavily discounted to the regulated asset value of the water business, because most of the dividends that the latter pays go towards servicing holdco debt (which includes a £310.4 million loan note carrying an 11% interest rate) or on management fees.

The true figure was probably nearer £100 million, he observed.