In the NTI newsroom we have been taking a look at Thames Water's last financial report, filed in October 2022 under the encouraging heading, 'Financing Life's Essential Service'. CFO Alistair Cochrane opened with a stirring call to arms and a slight admission: "We have a new Executive team in place, reconnected with our values and behaviours, and created two regional teams to become more local in the way we deliver for our customers. In addition, we’ve started to bring the maintenance of our water network in house and announced that we will bring all our customer."
The numbers reported go some way towards explaining the malaise the company finds itself in today (more in a bit). The net investment in Thames Water's network was £1,343 million, and the cost of day-to-day operational expenses almost a billion sterling. There is a report on a 25 kilometre Thames Tideway Tunnel being constructed to "divert millions of tonnes of sewage away from the River Thames" and a big green agenda.
Where did it all go wrong?
Thames Water did explain to us all in October last year that it serves 15 million customers across London and the southeast of England, but there was no reference to the fact it has come under intense pressure in recent years because of its poor record on leaks, sewage contamination, executive pay and shareholder dividends.
Ofwat raised concerns about the financial resilience of Thames Water last year and pressed the company to increase investment. In June 2022 investors agreed to inject £500 million, with “support for an additional £1 billion to follow subject to certain conditions”. It seems that is still not enough and although it is not a done deal, it looks likely that recent talks with as yet unidentified restructuring experts may lead the company to go into Special Administration.
In case you are wondering who owns the company, it is a consortium of pension funds and sovereign wealth funds. Its largest shareholder is Ontario Municipal Employees Retirement System, a Canadian pension fund. Others include the Universities Superannuation Scheme, the UK’s biggest private pension fund, and Infinity Investments, a subsidiary of the Abu Dhabi Investment Authority. They are said to be sceptical about delivering additional funding.
A Special Administration regime would effectively take the company into temporary public ownership and will need to be effected under statutory powers. This would be bigger than Bulb and we await further developments ...
