Li Ka-shing mulls Northumbrian Water bid

LONDON (Reuters) - Hong Kong billionaire Li Ka-shing's Cheung Kong Infrastructure Holdings (CKI) (1038.HK) said on Monday it was considering making a cash offer for Northumbrian Water NWG.L, sending the utility's shares up 8 percent.

A rise in inflation this year, from which UK water utilities are shielded through their regulated returns, is increasing the appeal of such companies to infrastructure investors who seek the safety of predictable, long-term cash flows.

Other British water stocks also jumped on the news. Severn Trent (SVT.L) shares closed up 2 percent, Pennon Group (PNN.L) ended trading up 2.3 percent and United Utilities (UU.L) finished the day up 3.3 percent.

"CKI is in the preliminary stages of assessing a potential cash offer for Northumbrian Water," CKI said in a statement released in London on Monday, adding that there was no certainty an offer would be forthcoming.

Northumbrian, which has a market capitalisation of about 2.13 billion pounds, confirmed in a statement that it had not received any proposal which could result in an offer for the company. It did not comment further.

Ontario Teachers' Pension Plan, Northumbrian's largest shareholder with a 27 percent stake, declined to comment on its intentions. Northumbrian shares have often risen on speculation that the Canadian pension fund manager could make an offer.

Earlier this month, the UK utility reported a 6 percent rise in annual profit, helped by an increase in water and sewerage charges and steady demand from its customers.

REGULATED ASSETS

Britain, a country open to foreign ownership of its infrastructure assets, has proved a popular investment destination for the octogenarian Li, Hong Kong's richest man, who has bought into regulated UK utility assets in the past.

CKI has already invested in two unlisted British water companies. It owns Cambridge Water and has a 4.75 percent stake in Southern Water, according to the company's website.

Last year, CKI and Li's other investment arm, Power Asset Holdings (0006.HK), agreed to buy the British electricity distribution networks of France's EDF (EDF.PA), which provide power to London and southeast Britain, for 5.8 billion pounds.

CKI, together with Power Assets Holdings, also jointly holds an 88.4 percent stake in Northern Gas Networks, which is located in Northern England and is one of the eight gas distribution networks in Britain.

Earlier this year, Hutchison Port Holdings (HPHT.SI), an infrastructure unit of Li's Hutchison Whampoa (0013.HK), raised $5.5 billion (3.4 billion pounds) in its Singapore listing, making it the largest initial public offering in Southeast Asia and the biggest in Asia to date.

(Additional reporting by Pav Jordan in Toronto; Writing and additional reporting by Greg Roumeliotis)