Macquarie Asset Management has acquired a majority share in Southern Water, which serves the Isle of Wight and also operates across Kent, Sussex and Hampshire.

After what it calls 'extensive consultation' with water and wastewater regulator Ofwat, Macquarie Asset Management says it plans to invest "approximately £1 billion in new equity to recapitalise the business and implement a more sustainable financing strategy", on behalf of long-term investors, including pension funds and insurance companies.

Over the next four years, there will also be an investment in infrastructure - to fix underperforming pipes, pumping stations, and sewers - which Macquarie says is equivalent to approximately £1,000 for each property in Southern Water’s catchment area (including those on the Island).

It has pledged to tackle leaks, pollution, customer service and to keep bills affordable.

In an open letter, Ofwat said it welcomed the investment into the Greensands group, which owns Southern Water but warned more cash would be needed further down the line.

It said: "We understand the investment will be held in a fund invested in ‘super-core’ regulated infrastructure, which will be advised and represented by Macquarie Asset Management.

"The investment includes at least £530 million, to be invested as new equity into Southern Water.

"The remaining funds will be used to begin to sort out the vulnerable financial position of Southern Water’s holding companies."

Read the letter in full HERE

Last month, Southern Water was handed a record £90 million fine after pleading guilty to illegal discharges of sewage, which polluted rivers and coastal waters in Kent, Hampshire and Sussex, between 2010 and 2015.

Referencing the court case, in Ofwat's open letter to Macquarie, it said: "We’re pleased to see that you will adopt an attitude of zero tolerance to environmental pollution.

"We welcome your intention to support and drive the turnaround of Southern Water’s performance, which you've backed with £230 million investment (part of the £530 million equity to be injected into Southern Water) for projects which Southern Water believes will put it in a good place."

Southern Water was also named joint worst for environmental performance, in a report by the Environment Agency (EA).

Isle of Wight MP Bob Seely was among those calling for the utility firm to set out its plans to phase out storm water releases and improve water quality in The Solent.

Leigh Harrison, Head 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.”

Keith Lough, Chair of Southern Water, said: “We wholeheartedly welcome Macquarie Asset Management’s investors as long-term shareholders of our business. A £1 billion equity investment in Southern Water and its group strengthens our balance sheet to enable Southern Water to increase investment in our network and accelerate the transformation plans we have put in place.”

Ian McAulay, Chief Executive Officer of Southern Water, said: “This is good news for our customers, the local environment, and the regional economy.

"This investment ensures we will be able to spend more than £2 billion in the next four years improving the resilience of our existing network to reduce pollution incidents and leakages.

"It strengthens our ability to tackle the longer-term challenges posed by climate change and population growth, at the same time as being responsible custodians of Southern England’s rivers and seas.

"With our long-term shareholders’ support, we are fully committed to protecting the local environment and providing the quality of service our customers deserve.

"Importantly, this new investment will help Southern Water create around 1,000 new jobs and expand our apprenticeship programme, assisting the economic recovery of our region as we tackle the global Covid-19 pandemic."

The Australian bank Macquarie previously owned Wightlink but it sold the ferry firm in 2015.