Thames Water’s former owner has been accused of mishandling utilities under its control as speculation remains over the future of London’s debt-ridden water supplier.
Macquarie, which owned Thames Water until 2017, was attacked by GMB Union on Monday as reports appeared it was set to stop pension schemes at another UK utility, Cadent Gas.
“This is a cost-cutting money grab by Macquarie to increase profits and dividends to shareholders,” GMB said, echoing similar accusations directed at the infrastructure asset manager after the Thames Water sale.
Macquarie’s 11-year ownership of Thames Water saw an estimated £2.8bn paid out in dividends while debt increased from £3.2bn to £10.5bn, according to company records.
Thames Water has since crept toward collapse, with talks being held over a prospective rescue of the water supplier to 15mln people in the UK.
According to Thames Water’s interim filings, debt now sits around £14bn and represents 80% of the company’s regulatory capital value, which was placed at £18.95bn by Ofwat in the spring.
Though the future of the company still remains up in the air, with a potential nationalisation on the cards, Thames Water’s second-largest shareholder has publicly backed revival plans.
“We remain of the view that, with an appropriate regulatory environment, the long-term objective of repairing important UK infrastructure and paying pensions to our members are in strong alignment,” the Universities Superannuation Scheme (USS) said on Sunday.
“We have given our backing to Thames Water's turnaround plan and Net Zero roadmap and engage with them regularly to support their long-term strategy.”
USS is one of the largest stakeholders in Thames Water, second only to the Ontario Municipal Employees Retirement System.
Thames Water shareholders:
- Ontario Municipal Employees Retirement System – 31.8%
- Universities Superannuation Scheme – 19.7%
- Infinity Investments SA – 9.9%
- British Columbia Investment Management Corporation – 8.7%
- Hermes GPE – 8.7%
- China Investment Corporation – 8.7%
- Queensland Investment Corporation – 5.4%
- Aquila GP Inc. – 5%
- Stichting Pensioenfonds Zorg en Welzijn – 2.2%
USS chief executive Bill Galvin admitted “significant investment” and time would be needed to turn Thames Water’s finances around, with £500mln injected and a further £1bn pledged by shareholders last year.
Jefferies analysts anticipate that Thames Water’s recent struggles will lead to tougher regulation on utilities meanwhile, as scrutiny also builds over lax environmental standards.
“Indeed, we have started to see more instances of equity injections,” Jefferies noted, “[but] we also see a broader challenge ahead”.
This will likely see a growing need for environmental capital expenditure, more focus on customer welfare and increased accountability among Thames Water and its peers, Jefferies added.