The Liberal Democrats have proposed that the government place Thames Water under special administration and restructure it as a public benefit corporation.
Sarah Olney, the Liberal Democrats’ spokesperson for Treasury matters, plans to propose in a discussion in Parliament for the largest privatized water company in England to be shut down using a law that has been recently revised by government officials.
The Liberal Democrats are the first major political party to propose that the embattled company should be acquired in order to safeguard water and sewage services for 15 million individuals.
Thames Water is in need of a £2.5bn bail out from its shareholders in order to remain financially stable through the end of the decade. To justify this investment, the company is asking Ofwat, the water regulator, to approve a 40% increase in customer bills, higher dividends, and decreased fines for pollution.
Olney has arranged a discussion in the House of Commons on Friday regarding the company’s current state. She stated, “Thames Water is now dysfunctional, and the government must decide whether to rescue them with public funds or transfer ownership to stabilize the company.”
The government must guarantee that the water supply remains available for millions of individuals in London and the south-east. Currently, the government has been passive while investors have mismanaged Thames Water. Thames Water executives have been exploiting sewage disposal for their own gain for a long time, and this must be the final consequence for them.
Thames Water has refused to allocate additional funds this week towards a £180 million joint effort with the industry to expedite measures for minimizing sewage contamination in England’s water bodies. The company’s holding organization has received a warning from its financial examiners that it may face financial difficulties by April if investors do not inject further capital into the company. It is imperative that they repay a loan of £190 million by April.
If a company is unable to pay its debts or is not meeting its legal obligations, it may initiate a special administration.
Olney stated that the ultimate issue was when Thames Water executives declined to provide funds for necessary sewage improvements this week. She found it disturbing that Conservative officials appeared to allow this to happen without consequence.
The government is creating a contingency plan, called Operation Timber, in case Thames Water goes bankrupt. However, Olney stated that officials should utilize their recently revised laws for water insolvency to place the company under special administration.
This scenario can be initiated by either the secretary of state or Ofwat. Olney stated that since the company is unable to settle its financial obligations and has refrained from making new sewage investments, it satisfies the requirements for special administration.
According to an analysis by the House of Commons library, the recently modified laws regarding water insolvency allow for a company to be acquired while still operational in order to ensure the continued provision of water and wastewater services for 15 million individuals. This change also ensures that the financial responsibility for any debts remains with the parent company, thus reducing the burden on taxpayers.
According to Olney, the company, after going through special administration, could transform into a public benefit company, where the focus is not on generating profits but on achieving environmental objectives.
In its most recent business plan, submitted to Ofwat for approval, Thames Water acknowledges that it has neglected its infrastructure for many years by relying on repairs rather than replacements, a practice known as “sweating the assets.”
Thames has pledged to allocate £4.7bn towards addressing the deterioration of its infrastructure. However, the company estimates that repairing its sewers would require £1.5bn and upgrading its sewage works would cost £2.2bn. As a result, Thames acknowledges that it may not be able to complete the intended investments into its aging assets, and may also fall short of meeting its environmental commitments by the end of the decade.
“The company is currently facing investigations by Ofwat and the Environment Agency for possible unlawful release of sewage from several treatment facilities. Ofwat’s investigation, expected to conclude in a few months, may result in Thames receiving significant fines. The company has acknowledged that 157 treatment works are not in compliance.”
Thames Water chose not to provide a response.
A representative from the government stated that water companies are profit-driven organizations and thus, they cannot disclose any financial information regarding individual companies. The government is proactive in anticipating various outcomes within regulated industries, including the water industry, as expected of a responsible government.
Source: theguardian.com
