In a notable shift within the infrastructure investment landscape, Thames Water will be removed from the infra300® market index, effective July 1, 2024. Thames Water had been included in the US$290bn index, which tracks the performance of 300 infrastructure assets in 20 countries, since its inception date 24 years ago. This decision follows the recent draft price determination and the imposition of a special administration regime on Thames Water, both of which have generated considerable uncertainty regarding the company’s ability to attract equity investors to sustain its status as a viable private infrastructure investment. By June 30, 2024, the company’s market capital, as reported in infraMetrics®, had plummeted by 51.8% compared to the previous quarter.

Scientific Infra & Private Assets (SIPA), which calculates and administers the infra300 index and is an ESMA-registered market benchmark for private infrastructure investments, has been closely monitoring the evolving regulatory environment affecting Thames Water. Recent developments have raised concerns about the company’s ability to operate as a private infrastructure business under current and anticipated regulatory conditions. These factors have led to a comprehensive review and the subsequent removal of Thames Water from the infra300 index which is used by a range of investors representing close to US$500bn of infrastructure assets under management.

UK Power Networks, a renowned electricity distribution network operator, will replace Thames Water in the infra300 index. UK Power Networks has demonstrated strong operational performance, regulatory compliance, and resilience, making it a highly suitable addition to the index. This inclusion aligns with the infra300’s objective of providing investors with exposure to a representative set of infrastructure assets.

Frederic Blanc-Brude, CEO of SIPA, commented on the change: “The infra300 index provides a measure of the financial risks taken by investors in infrastructure. The decision to remove Thames Water was not taken lightly. However, given the increasing regulatory uncertainties and challenges facing the company, the SIPA index committee wanted to ensure that the infra300 continues to represent the private infrastructure investment universe. UK Power Networks is a suitable replacement in the UK and corresponds to the same segment (IC80, Network Utilities) in the TICCS classification of infrastructure companies.”

UK Power Networks delivers electricity across London, the South East, and the East of England. With more than GB£2 bn in turnover, GB£15 bn in total assets, and a profit of GB£600 million in 2023, the company exemplifies stability and growth.

Replacing Thames Water with UK Power Networks will not alter the representation of the flagship infra300 Index, which is equal-weighted. On a value-weighted basis, the weight of network utilities (IC80) in the infra300 is expected to increase by approximately 2.3%. SIPA will continue to monitor the regulatory landscape and make adjustments as necessary to maintain its commitment to representing the investible universe of unlisted infrastructure companies.

Download the full press release here.