Pic: Sky News
ICSM Business – Utilities Insolvency News: Thames Water on the brink of going bust as funders pull out
By Harry Mottram: Privatisation may have been a good idea at the time but there’s a growing feeling that in many cases it just doesn’t work. Where as you can usually switch companies that supply gas and electricity with water you can’t – and the mismanagement at Thames Water has brought that utility to brink of collapse. Where do you start with the farce that has seen this once profitable firm seemingly about to go bust and force the Government to step in and re-nationalise it. The company has been seeking £500 million pounds of emergency funding to see it through a financial crisis. The backers are Canadian pensions firm Omers; the UK university staff pension scheme; China’s sovereign wealth fund and a subsidiary of the Abu Dhabi sovereign wealth fund. They have collectively seen no prospect to getting their cash back – especially if the Government step in.
Next up is the ludicrous idea that Thames Water have asked Ofwat if it can raise its prices by 40%. There is no way that is going to happen as it far exceeds the level of inflation and would (excuse the pub) ‘blow the Government’s credibility out of the water.’
There’s also the governance of the firm with its record of dumping sewage into local revers and seas – a huge increase in recent months – blamed on the heavy rain – but the idea that the Oxford Cambridge boat race is in danger from ecoli is a PR disaster.
These next two quotes come via The Guardian. A statement on behalf of Thames’s shareholders said: “After more than a year of negotiations with the regulator, Ofwat has not been prepared to provide the necessary regulatory support for a business plan which ultimately addresses the issues that Thames Water faces. As a result, shareholders are not in a position to provide further funding to Thames Water. Shareholders will work constructively with Thames Water, Ofwat and government on how to address the consequences of Ofwat’s decision.”
An Ofwat spokesperson said: “Safeguards are in place to ensure that services to customers are protected regardless of issues faced by shareholders of Thames Water. Today’s update from Thames Water means the company must now pursue all options to seek further equity for the business to turn around the performance of the company for customers.”
The firm has further problems as its parent company Kemble Water Finance said it can’t repay a £190 million pound debt due at the end of April and has appointed Alvarez & Marsal to speak to the lenders. Under the control of Australian Bank Macquearie who had owned the utility huge amounts of cash were taken out to pay shareholders at the expense of investment. In 2017 Macquearie sold it to the Canadian pensions group OMERS and the Kuwait Investment Authority.
Ian Carrotte of ICSM said: “Whatever happens there are hundreds of contractors and suppliers to Thames Water who must be wondering if they will get paid for their past and current work. And also thinking will there now be a freeze on future contracts – all the while there is maintenance work that needs to be done to stop the leaks. Michael Gove has said the leadership of Thames Water is a disgrace – that’s an understatement – but the environment secretary needs to intervene as the situation is untenable.”
It seems likely the firm will enter ‘special measures’ soon if no new money is forthcoming. That would mean Thames Water is owned by the tax payers with the Government seeking new owners in the coming months. With an election likely this year the long term future of the utility firm is unclear. The firm was privatised by the Conservative administration of Margaret Thatcher in 1989.
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