Hong Kong Tycoon Li Weighs London Infrastructure IPO

(Bloomberg) -- Hong Kong tycoon Victor Li’s CK Infrastructure Holdings Ltd., which owns energy and water utilities globally, is considering listing some U.K. assets through a London initial public offering, according to people with knowledge of the matter.

CK Infrastructure is speaking with investment banks about the listing of certain U.K. holdings through a potential multibillion-dollar fund, said the people, who asked not to be identified because the information is private. The company is still discussing the entity’s structure and which assets to include, and it may decide not to pursue the transaction, they said.

The Asian investor built a stable of British infrastructure assets ranging from sewage to gas to rail over the last decade. The potential listing could help CK Infrastructure replenish capital after the acquisition spree, giving it more firepower to go after bigger deals in the future.

An IPO could also facilitate any move by CKI to reduce its exposure in the U.K. -- amid uncertainties tied to the country’s looming exit from the European Union and the so-called "return reset" for some of its assets. For instance, the regulatory reset for Northumbrian Water is due to commence in April 2020.

“Brexit has introduced some political uncertainties; especially the Labour Party has proposed nationalization of the water utilities in the UK. We think this scenario is quite extreme but the reset will be uncertain," said Dennis Ip, an analyst at Daiwa Securities Group Inc.

Shares of CK Infrastructure closed up 2.5 percent at HK$62.70 in Hong Kong, giving the company a market value of about $21 billion.

A group led by CK Infrastructure in 2010 acquired the U.K. power networks from Electricite de France SA for 5.8 billion pounds ($7.6 billion) and a year later bought utility Northumbrian Water for 2.4 billion pounds. In 2015, CK Infrastructure acquired Eversholt Rail for 2.5 billion pounds to gain control of almost a third of the U.K.’s passenger trains.

Some assets are jointly held with Power Assets Holdings Ltd., a separately-listed arm of CK Infrastructure, and Li’s flagship conglomerate CK Hutchison Holdings Ltd. A representative for CK Infrastructure didn’t respond to requests for comment.

“The move is positive to CKI,” Alex Wong, Hong Kong-based director of asset management at Ample Capital Ltd., said by phone Friday. “It’s also good timing for them to divest now, as investors are looking for defensive plays.”

CK Asset Holdings Ltd., which is also backed by Li’s family, has made infrastructure acquisitions of its own in recent years in Australia, Germany and Canada.

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