A consortium of Canadian and Kuwaiti investors will buy a 26 per cent stake in Thames Water from funds managed by investment bank, Macquarie.
The deal is the latest high-profile acquisition of British infrastructure by overseas investors in recent years.
In December last year, Macquarie led a consortium including Chinese and Qatari buyers to buy a majority stake in Britain's £13.8 billion gas pipe network from National Grid.
The disposal brings to an end Australian group Macquarie’s eleven-year involvement in the UK’s largest water supplier.
Thames Water has 15 million customers across London and the Thames Valley and provides around 2.6bn litres of water a day.
Macquarie bought Thames Water as part of a consortium from German utility RWE in December 2006 for £8bn, outbidding rivals including the Qatar Investment Authority.
Canadian pension fund investor Borealis Infrastructure and the infrastructure investing arm of the Kuwait Investment Authority said they had agreed to buy the stake from Macquarie Infrastructure & Real Assets but did not disclose the price paid. Reports suggested Macquarie had been seeking around £1-1.5bn.
“The Consortium has met with Thames Water’s existing management team and will support Thames Water's ongoing £4.5bn capital investment program – for the 2015 to 2020 regulatory period –the largest in the UK water industry,” the buyers said in a joint statement.
Martin Stanley, head of Macquarie's infrastructure division, said: “We feel privileged to have been associated with Thames Water for such a long period of time and are pleased to have significantly increased investment levels and improved operational performance.
“Today, Thames Water is undoubtedly a better, stronger and more customer-focused business than that which we invested in back in 2006.”
During its tenure, Thames Water invested more than twice the amount it had during the five-year period before privatisation in 1989, Macquarie said.
Additional reporting by agencies
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