Yorkshire Water receives fresh funding despite sewage fines and pay row | Water industry

A high-profile European investor will inject new funds into Yorkshire Water, including helping to cover a £600m loan, despite recent heavy sewage fines and a scandal over executive pay at the utility company.

EQT, a Swedish private equity group, announced on Monday that it would take a 42% stake in Kelda Holdings, the parent company of Jersey-registered Yorkshire Water, which has 5.7 million customers in Yorkshire and parts of the East Midlands and Lincolnshire.

The move will effectively make it part owner of Yorkshire Water, taking the stake of existing shareholder GIC, an investment company, to 42%, and TCorp, the Australian public sector investment vehicle for New South Wales, to 16%.

EQT said part of the deal would involve contributing to a £600m “inter-business loan repayment” which is due before March 2027, while being “fully supportive” of spending plans to clean up Yorkshire’s record on sewage spills.

The buyout group has already invested in four British factories that burn household and commercial waste to produce electricity, through a stake in waste-to-energy company Encyclis, and in water treatment operations in the United States, the Caribbean and Latin America, according to its website.

The deal comes as Yorkshire Water faces increasing scrutiny over its environmental record and executive pay. Last month he was fined £700,000 for repeatedly dumping sewage into a stream.

A succession of sewage pollution incidents in Pools Brook National Park, near Chesterfield, starting in 2018 killed fish and insects and polluted the stream for more than half a mile, the Environment Agency found in February.

Last year the Guardian revealed that Nicola Shaw, its chief executive, had received £1.3m in undisclosed extra pay since 2023 via the offshore parent company. Shaw received £660,000 from Kelda in the 2023-24 and 2024-25 financial years, and the amount of the fee was not disclosed in Yorkshire’s annual report.

This led the government to decide to close loopholes that allow water company bosses to continue to receive large bonuses despite a ban passed last year.

Bosses of companies illegally dumping sewage into England’s rivers and seas, including Yorkshire’s Shaw, received millions in bonuses despite the ban. MPs said the loopholes allowed companies to circumvent the bonus ban by labeling payments differently or paying bosses through linked companies.

The sewage scandal has returned to the spotlight in recent weeks after the Channel 4 TV series Dirty Business told how private companies were allowed to pollute Britain’s rivers and waterways.

Among the highest-profile offenders is Thames Water, which was rated the worst water supplier by the Environment Agency last year, while ratings across the sector have also hit rock bottom due to record levels of wastewater pollution.

Thames is in talks with its lenders to try to avoid a financial collapse, which would lead to the struggling water company coming under government control via temporary nationalization.

Last year the government announced it would replace the powers of Ofwat, the Environment Agency and the Drinking Water Inspectorate in a bid to “reset” the scandal-hit sector, following a review by former Bank of England deputy Sir Jon Cunliffe. A transition report will outline the next steps to complete this transition, officials said in January.

Yorkshire Water has been subject to attempts by shareholders to sell their stakes in recent years, and analysts at the Royal Bank of Canada wrote that the new funding was “a positive signal” for the sector amid regulatory shake-up.

On Monday, Shaw described the new investment as “a big step forward.” She added: “The EQT team will bring additional expertise to our board, and their support is a strong vote of confidence in our plan to improve performance and the progress we have made to date.

“EQT has a long-term outlook and its team is committed to supporting the delivery of our £8.3 billion investment programme. »

The company plans to increase average annual water bills by 6% to £636 from next month.

Funds controlled by DWS, the asset manager majority-owned by Deutsche Bank, and Corsair, a US private equity group, previously jointly owned 54% of the company, while GIC and TCorp’s stakes increased to 34% and 13% respectively.

EQT Infrastructure partner Kunal Koya said the firm was “a responsible private capital manager” and could help “modernize” the water sector.