Big Problems in Waterworld

Big Problems in Waterworld

Thames Water's issues appear to have reached a nadir. The privatised water company model seems to be in tatters. Thames' biggest investor - a Canadian pension fund - described the business as 'worthless'. Board members at Thames' parent company Kemble, are resigning after refusing to commit £3bn to support Thames' ailing infrastructure.

Currently, Thames has a debt pile of £18bn, crumbling leaky infrastructure and dumped 72bn litres of raw sewage into river networks. I've written previously about how we got to this point in the article Leaking Pipe & Piling Debt .

The big question is: what happens now?

The decline of Thames Water is evident and a decision about its future needs to be made!

According to the Guardian, Whitehall are already planning 'Project Timber' which would see Britain's biggest water company turned into a publicly owned 'arms length' body. This would involve the bulk of Thames' debt being added to the public purse.? ??

It's important to remember that Thames was debt-free when it was privatised.

So, what are the options:

According to a recent BBC article, they are 3 - fold:

1.Re-nationalisation

Bringing Thames back into public ownership. This is probably very costly and a definite political 'hot-potato' - particularly in an election year. There is precedent for this though when the energy company Bulb when bust in 2021.

2. New shareholders

Could new shareholders get involved? Ofwat states in spite of its debts, Thames still generates £2bn a year.?Sounds good, but what won't be attractive to investors is the fact that there have been no dividends paid since 2017.

3. Better lending terms

Clearly this could help Thames in the short/medium term. However, it could well have implications for the whole industry. If Thames can't keep up with its debt payments borrowing costs may well increase for others in the sector with similar borrowing arrangements.

4. Kick the can down the road?

According to the Beeb, the most likely outcome. A compromise with lenders, Ofwat and shareholders which enables Thames to keep plodding on without resolving the underlying issues.

Whatever the outcome, safe water for Greater London and the surrounding areas is key

The only thing which seems fairly certain is that the quality of the product is highly unlikely to improve and yet prices are very likely to rise.

Paying more for less - NOT the privatisation dream we were sold.? ? ?

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