Macquarie (ASX:MQG) share price struggles following $2b UK investment news

The Macquarie share price is struggling after news of its $2 billion water investment.
The post Macquarie (ASX:MQG) share price struggles following $2b UK investment news appeared first on The Motley Fool Australia. –

At the time of writing, the Macquarie Group Ltd (ASX: MQG) share price is struggling after news of a $2 billion investment in the UK.

What has Macquarie done?

The investment bank announced that Macquarie Asset Management (MAM) has reached an agreement to acquire a majority stake in Southern Water Services in the UK.

The Southern Water Services plan

Macquarie outlined that this business provides water services to 2.6 million and wastewater services to 4.7 million customers in Kent, Sussex, Hampshire and the Isle of Wight.

MAM will invest, on behalf of its long-term investors including pension funds and insurance companies, over £1 billion in new equity (almost $2 billion) to recapitalise the business and implement a more sustainable financing strategy for Southern Water.

This money will allow Southern Water to invest “significantly” to upgrade its network. Over the next four years of the current regulatory period, Southern Water will invest £2 billion to fix pipes, pump stations and sewers. These infrastructure items are reportedly “underperforming” and are causing harm to the local environment.

MAM outlined the size of the investment, saying it equated to £1,000 for each property in Southern Water’s catchment area. The capital will allow the business to improve its operational performance for stakeholders and increase the financial performance and resilience for shareholders.

Macquarie makes commitments

MAM has had long discussions with Ofwat, which is the regulator of water and wastewater services in England and Wales.

The investment bank noted that Southern Water has one of the worst track records in the UK water sector. It aims to reduce pollution incidents by more than 50% over the next four years. It is committed to significantly improving Southern Water’s environmental track record with a zero-tolerance mindset.

Another part of the plan is to reduce leaks through the significant investment programme.

The next commitment was ensuring affordable customer bills. The commitment was that, in total, average water and wastewater customer bills don’t rise by more than inflation. That’s in addition to honouring an existing £123 million customer rebate due to historical incidents.

Finally, Southern Water wants to offer better customer service by fixing the issues that customers are complaining about, and increasing the capacity to handle complaints.

Macquarie commentary

Leigh Harrison, the boss of Macquarie Infrastructure and Real Assets, said:

Southern Water needs significant investment to improve its operational and environmental performance, and financial health. Without it, the business will be unable to fulfil the expectations of the millions of customers that rely on its services each day or reduce its negative impact on the local environment.

This major £1 billion equity investment by one of our long-term infrastructure funds will help put Southern Water back on a stable footing and enable an ambitious multi-year transformation plan to make essential water and wastewater services in the South East of England more sustainable and resilient.

While we expect Southern Water will have made substantial progress in addressing its issues by the end of 2025, we acknowledge the business’ transformation will take time and that is why we intend to own our stake in Southern Water over multiple regulatory periods.

Macquarie share price snapshot

Whilst Macquarie shares haven’t done much today, it’s up 8% over the last six months and up more than 25% in the last year.

The post Macquarie (ASX:MQG) share price struggles following $2b UK investment news appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More reading

Leading brokers name 3 ASX shares to sell today

What could the latest climate report mean for ASX 200 shares?

Wesfarmers (ASX:WES) share price rises amid latest digital push
Santos (ASX:STO) share price slides as UN calls “death knell” on fossil fuels
Which shares are leading the ASX 300 on Tuesday?

Motley Fool contributor Tristan Harrison owns shares of MFF Capital Investments Limited and WCM Global Growth Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!