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  • by Karma Loveday

Macquarie shores up Southern with £550m equity injection

Macquarie has shored up Southern Water’s finances by agreeing to a £550m equity boost.

The new funding comes on top of the £1.1bn injected when funds managed by Macquarie Asset Management bought Southern in September 2021. It takes Macquarie’s total investment to £1.6bn, supporting a record £3bn investment programme in AMP7.

Southern said the new investment would help maintain the momentum of its Turnaround Plan to improve outcomes for customers and the environment, and help manage the impact of high inflation and interest rates.

£375m will go into the regulated business to lift investment, with the remaining £175m to be used at group level to support financial resilience and prudent gearing. According to Southern: “The new funding will enable us to increase planned capital investment in our network by 50% to £3bn (from £2bn) during this regulatory period (2020-25), equivalent to investing £1,500 per household in our area.”

Chief executive, Lawrence Gosden, called Macquarie’s move “a strong vote of confidence in our operational transformation”.

Southern offered the following as examples of progress made so far:

• a two-star rating from the Environment Agency, up from one star – this included cutting serious pollution incidents from 12 to five and Southern is targeting three stars by 2025;

• rolling out 24,000 sewer sensors, and reaching 99% EDM monitoring;

• leakage at 17% compared to the industry average of 23% – Southern is targeting 10% by 2050; and

• 121,000 vulnerable customers on a 45% bill discount, taking this to £241 per year on average.

Fitch recently downgraded Southern’s ratings from BBB+ with negative outlook to BBB with negative outlook. This produced a credit rating downgrade ‘trigger event’, blocking dividends.


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