The water utility is in an existential crisis.
(Photo: Bloomberg)
London The heavily indebted British water utility Thames Water is apparently on the verge of nationalization. According to reports in the British media, the management of Britain’s largest water company is in talks with the government in London about a rescue. According to reports, this is also about a temporary takeover by the state.
The reason for the escalating crisis is debt of more than 13 billion pounds (around 15 billion euros). Thames Water CEO Sarah Bentley surprisingly resigned on Tuesday evening with immediate effect. The company said it is working with shareholders and investors to secure funding.
The financial markets initially reacted with shock to the crisis. The price of a Thames Water corporate bond fell by around a third in the short term. Thames Water has outstanding bank loans of £4.3 billion and owes its bondholders around £9.5 billion. The company is thus significantly more indebted than all of its competitors.
Thames Water supplies water to around 15 million households in London and the South East of England. Like the rest of the industry, the company was privatized and completely deleveraged by former British Prime Minister Margaret Thatcher in 1989.
Today the utility is owned by a group of investors made up of private equity companies and pension funds. The main shareholder is a Canadian pension fund from Ontario with about 31 percent.
Bad water quality, high prices
Critics have long accused private water companies of driving up prices, neglecting water quality, and giving generous payouts to shareholders and managers. All of this was partly paid for with high debts. The whole industry is in the debt with about 60 billion pounds. Thames Water has also been battling major leaks for years and has been blamed for polluting rivers with sewage.
A 2015 study by the National Audit Office found that average household water bills have risen 40 percent faster than the rate of inflation since 1989. According to an analysis by The Guardian newspaper last year, water companies have paid out £66 billion in dividends to shareholders since privatisation.
An opinion poll by the Yougov institute in September last year found that around two-thirds of Brits would prefer to see the water supply back in the hands of the state.
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