One of the major shareholders in Thames Water has significantly reduced the estimated worth of their investment in the financially burdened water company by almost 66%, following the company’s recent acknowledgement of insufficient funds to meet its debt obligations.
A financial organization managed by the University Superannuation Scheme (USS), which is the second largest investor in Thames Water, recorded a loss of approximately £600m in the previous year. This was due to lowering the estimated value of the troubled water company as it works to stabilize its financial standing.
The largest private pension fund in the UK, known as USS, owns a 20% share in Kemble Water, the parent company of Thames Water. This ownership is primarily through their subsidiary, Church Water Investment.
The investment fund reported a decrease in the worth of their ownership in Kemble, from £956m in 2022 to £364m in the previous year. This suggests that the value of the largest water company in Britain has dropped significantly, from approximately £5bn in 2022 to £1.9bn last year.
Thames Water’s valuation has been significantly reduced for the second time in recent months due to cuts from its biggest shareholder, the Ontario Municipal Employees Retirement System (Omers), which occurred in July of last year.
A major pension fund in Canada announced a 33% decrease in value after reporting that its ownership of 30% in Kemble went from being worth £979m in late 2021 to approximately £700m in 2022.
A representative from USS stated that the fund remains in support of Thames’s efforts to turn around and will offer “patient capital” to assist the company’s long-term goals.
The financial troubles faced by Thames have raised concerns about the company’s future. They are facing difficulties in obtaining funds to address a debt of approximately £18 billion and to invest in handling sewage overflows and water leaks.
Last year, the company acknowledged to Members of Parliament that it lacks the necessary funds to pay off its debts. It has upcoming deadlines to repay £1.4bn, with £190m due in April. It caters to approximately a quarter of households in England.
Concerns about the fate of Thames Water intensified last summer when its previous CEO, Sarah Bentley, stepped down and news broke that the government was preparing contingency plans in case the company needed to be re-nationalized in an emergency. In the past month, the company has hired Chris Weston, a former executive from British Gas, as its new leader with a potential salary of £2.3 million per year.
USS stated that Thames Water’s difficulties stem from years of inadequate investment and the recent effects of rising energy costs and other inflationary expenses. Despite this, USS has expressed support for Thames Water’s most recent business plan.
As a committed investor, we are able to offer enduring financial support and actively manage the company with responsibility. While our evaluation of our Thames investment may fluctuate over time, we remain committed to maintaining it as a long-term investment that aligns with the scheme’s long-term goals.
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“We were prepared to invest more money into the business in March [of 2023] and have also expressed a willingness to continue doing so in the future.”
In July, Thames fell short of its target to obtain £1 billion in emergency funding. However, the company’s shareholders did agree to contribute £750 million to support the company’s financial stability until 2025. It has been revealed that approximately £500 million of this amount is in the form of a loan with an 8% interest rate.
According to a spokesperson from USS, we have not received any shareholder dividends or interest payments on loans since our initial investment in 2017. Instead, shareholders have chosen to reinvest their capital into the business to promote growth and enhancements.
Our belief is that, given the right regulations, the ultimate goal of fixing crucial infrastructure in the UK and providing pensions to our members are well-matched.
Source: theguardian.com
