Utility Week

UTILITY WEEK | 9TH - 15TH MARCH 2018 | 11 Policy & Regulation other WOCs could continue without being swallowed up by the larger water and sewer- age companies (WASCs). "The likelihood of further acquisi- tions was increased when the Competi- tion and Markets Authority [CMA] decided that Ofwat's concerns over the loss of com- parators was not su€ cient to prevent the Bournemouth purchase. Then Dee Valley's acquisition by Severn Trent in early 2017 seemed to con‰ rm the trend. "However, Ancala's purchase of Ports- mouth Water has now taken the sector in another direction and bucked the trend, with the company's chairman making it clear that Portsmouth Water would remain independ- ent. Ancala will also clearly have taken into account the diŽ ering political intentions for the sector before deciding to invest, so its decision can be seen as a vote of con‰ - dence by investors in the current regulatory regime." He adds: "These latest developments suggest there is still life in the mergers and acquisition market for WOCs, whether or not the purchasers are other water companies or outside investors." Ancala now has a foot in the door of the sector, but the company is not letting on whether it is looking to acquire any other water companies. But if any more "for sale" signs go up this year, Ancala may decide to show its hand and ‰ rmly step inside. Portsmouth Water Portsmouth Water serves a domestic population of 722,000 in Portsmouth, parts of East Hamp- shire and West Sussex, and has 251 employees. It also supplies water to a range of industrial and commercial customers. The company was formed in 1857 as the Borough of Portsmouth Waterworks Company to supply Portsmouth. It grew through a series of mergers, including with Waterworks Company in 1955. It is currently majority owned by its Employee Bene† ts Trust. The remainder of the shares are owned by several people, including current and former directors and their bene† ciaries. Looking to the future, Portsmouth, along with the rest of the water sector, is currently focused on re† ning its PR19 business plan. The company's prospects in the upcoming and challenging price review are not clear cut. While there are many factors that weigh in the company's favour for a positive † nal determina- tion – such as its market-leading performance against the Service Incentive Mechanism – there are other aspects of the business that could hold it back. In Utility Week's recent Foresight report PR19 leaders and laggards: How will the WOCs perform?, Portsmouth's business plan was ear- marked for slow tracking by sector experts. For many of them, doubts about the company's ability to achieve fast track status were based on Ports- mouth's high levels of artesian debt, which commentators warned could cause it to struggle with the historically low projected Wacc in AMP7. Furthermore, shortly a' er the publication of Ofwat's † nal methodology for PR19 – including its Wacc intentions – credit ratings agency Moody's seemed to corroborate this market pessimism over Portsmouth's prospects when it issued a statement down- grading the company's outlook from "stable" to "negative". What we know about Ancala Partners In addition to the Portsmouth Water acquisi- tion, Ancala says it has "extensive" infrastruc- ture investment experience and is a "trusted partner and owner" for governments, regula- tors, customers and communities in which its portfolio businesses operate. Ancala's other portfolio companies include: • International Energy Group (IEG): IEG owns and operates the sole gas distribution network and supply business in the Channel Islands and Isle of Man. • Scottish Area Gas Evacuation system (SAGE): Ancala acquired a 30.3 per cent interest in SAGE terminal and pipeline and a 60.6 per cent interest in Beryl pipeline from Apache Corporation in November 2017. The investment was made through the Ancala Midstream platform, a business established to complete and manage investments in North Sea midstream infrastructure assets. • Leep Utilities: a multi-utility joint venture with the Peel Group, a UK property group, which owns and operates a range of regulated "last mile" electricity, water and district heating utility assets. • Green Highland Renewables (GHR): an owner and operator of hydro-electric power plants in Scotland. Ancala has established GHR as a platform for growth in the UK hydro sector both organically and through acquisitions. • Ancala Solar: Ancala has built a circa 100MW portfolio of 21 ground-mounted solar PV plants across the UK. Ancala¡has recently retro† tted the portfolio with batteries for electricity storage. • Biogen: an owner and operator of biogas plants in the UK with around 25MW installed capacity. Ancala is using the company as a platform for growth in the UK biogas sector and has recently completed the follow-on acquisitions of Millerhill and Tamar Energy. marked for slow tracking by sector experts. Northumbrian Water Yorkshire Water United Utilities DVW SSC SSC Severn Trent Water Thames Water Wessex Water South West Water Welsh Water Anglian Water ESK ESK SEW AFW Southern Water Portsmouth Water SEW SES SEW SBW CHL BRL AFW AFW HPL

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