Universities Superannuation Scheme Ltd (USS), the sole corporate trustee of one of the UK's largest pension funds, has increased its holding in Thames Water to nearly 20%.

Thames Water HQ in Reading

The Trustee of the UK’s largest private pension scheme by way of assets, USS has agreed to acquire an additional 8.77% in Kemble Water Holdings Ltd, the ultimate holding company of Thames Water Utilities Ltd (Thames Water), from investors Wren House Infrastructure LP.

USS first became an investor in Thames Water in 2017, attracted by the opportunity to support the long-term investment needs of the business. This matches well with the outlook for pension schemes which need to take a long-term investment outlook in order to pay pensions for decades to come.

The experienced investor in regulated infrastructure assets, also has existing investments in both Heathrow Airport Holdings Ltd and National Air Traffic Services (NATS), which manages UK airspace, as well as other regulated assets around the world.

This will be the largest single investment in the £82.2 billion (as at 31 March 2021) portfolio managed by USS’s investment management subsidiary.

Announcing the purchase, USS said that while challenges remain, including ageing infrastructure and impact of climate change, Thames Water has performed well over the last year. With a strengthened board under CEO Sarah Bentley, and a new, experienced executive leadership team in place the company will target reducing leaks, investing in its infrastructure, improving customer service and working towards Net Zero.

Simon Pilcher, CEO of USS Investment Management, said:

“We are delighted to be making this further investment in Thames Water, a critical supplier to millions of people every day. Under its new management team, the company is juggling many priorities, such as Net Zero, that will require the kind of decades-long investment time horizon, as well as stewardship skills, that we can offer. We look forward to supporting on the next stage of the company’s journey.”

Mike Powell, Head of the Private Markets Group, added:

“Thames Water has some key challenges to overcome in the coming decades. Real progress has been made but customers and the general public quite rightly expect more. This will require hard work and further substantial long-term investment. USS is ready to support Thames on this journey but it can only be achieved with all the company’s stakeholders working together, creating the right environment to deliver the investment that everyone wants.”

Thames Water launched its turnaround plan earlier this year and have a new Executive leadership team in place, with a focus on improving customer service, reducing complaints, investing in its infrastructure, reducing leaks and working towards net zero.

Ian Marchant, Chairman, Thames Water commented:

“This increase in investment is testament to the company’s commitment to develop a long-term strategy to ensure a resilient water and waste service for generations to come. With a new experienced leadership team ready to turnaround the business, we are determined to become a water company our stakeholders, customers and employees can be truly proud of.

“Being innovative is important to our success and it’s something we’ve been particularly focused on alongside investing in the company’s infrastructure, customers, and our responsibility to the natural environment. We look forward to working with USS, alongside our other shareholders, to support the executive team to ensure Thames Water becomes a high performing company.”