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Telegraph
2 days ago
- Business
- Telegraph
Enough is enough. Let Thames Water go bust
There comes a point in every corporate disaster when enough is enough and the plug has to be pulled. One such is Thames Water, which has sailed rudderless from one mishap to the next for over a decade now, with still no resolution in sight. Surprise, the latest hope of salvation – £4bn of new equity from the US private equity outfit KKR – has failed as comprehensively as all previous attempts to give Thames a viable future. After months of due diligence, KKR has concluded what must have been obvious all along – that the political and regulatory risks around Thames Water are just too big to be worth the candle. Water companies have in recent times managed the near-impossible feat of usurping the position once occupied by banks as the most hated corporate sector in the land. Campaigners such as the former Undertones singer Feargal Sharkey have raised the profile of the industry to the point where there is nowhere left to hide. Rising bills in combination with deteriorating water standards have made Thames and its nine, fellow privatised water companies into symbols of wider national failure. If KKR needed any further persuading of the folly of involvement with this nightmare of a company, the lambasting Thames recently received in the House of Commons for sewage spills and retention bonuses must surely have been the final straw. There's a price for everything, it is sometimes said, but maybe not with this industry, where to be an investor or lender is to be seen as the unacceptable face of capitalism in modern form. Good luck to the other bidders said to be circling Thames now that KKR is out of the way. They will no doubt eventually come to the same conclusion. In its current incarnation, Thames is holed below the water line. It's hard to see why anyone would want to take the tiller. The clamour for retribution is now so great as to render almost any form of investment completely unviable. I was an enthusiastic supporter of water privatisation when it was first mooted in the late 1980s. Back then, water standards were even worse than they are today. You couldn't even trust the drinking water, which would regularly fail European standards, let alone Britain's beaches or rivers. As publicly owned utilities, water companies had to take their place in the pecking order of public spending priorities, and it was inevitably a lowly one. Political pressure to keep bills low further starved the industry of the resources needed to meet increasingly demanding standards. For ministers, privatisation served a double purpose; not only did it promise much needed private capital for infrastructure renewal, it also meant that they would finally be shot of a seemingly constant source of political complaint. So desperate was the Treasury to get the water companies off the books that they were flogged off pretty much debt free, and in some cases with overflowing 'green dowries' to make them more attractive to investors. Sadly, it has not worked out well. The few water companies that have remained publicly listed enterprises haven't fared too badly, but the ones subsequently bought by private equity – including Thames Water – have been pillaged to destruction. Stripped down to the last lightbulb by rapacious financiers, they increasingly cut corners and are today in all kinds of trouble. What goes around comes around, and the private ownership that was once seen as the solution is now condemned as a major part of the problem. Attempts to find a future for Thames Water within the current framework of debt and equity ownership have gone about as far as they reasonably can. Any further machinations merely prolong the agony, and are really only about salvaging at least something from the wreckage for current senior creditors, as well as lining the pockets of a veritable army of advisers and lawyers. Most of them deserve little sympathy, even if the original sin at Thames was committed by a generation of owners who have long since disappeared with their bags of swag. Many will take positive pleasure in the likes of Elliott Management, a vulture capital fund that specialises in buying up distress debt and squeezing it dry, losing their shirts. Their only motivation is value extraction. They cannot be allowed to dictate the future course of bills and regulatory obligations. I no longer buy the argument that putting Thames into 'special administration' – a form of insolvency procedure intended to ensure protection for public services – would send a bad message at a time when the Government is looking to raise hundreds of billions of pounds from private investors for Britain's energy transition. Rather the reverse; actually, it would say yes, we want private investment, but on fair terms that don't seek to rip the heart out of essential public services. Since I cannot put it any better myself, let me just repeat what a reader said on a rival news site: being open for business does not mean being open to exploitation. The bottom line is that in order to properly meet its social and environmental obligations, Thames needs to be made largely loan-free, wiping out the near £20bn of debt that it is currently struggling to service. The arguments in favour of this approach are now so overwhelming that it is hard to see why ministers are still hesitating. From a political perspective, it would be extremely popular, which is why Nigel Farage's Reform UK has latched onto it as gainful, populist fodder. That doesn't necessarily mean it is the right thing to do; often, the easy, popular course turns out to be the wrong one. But what are the alternatives? The 30pc haircut to more junior debt holders currently under discussion is very unlikely to be sufficient. Despite initial fears that it would cost the taxpayer an arm and a leg, the most recent example of special administration – Bulb Energy – has worked out reasonably well. Bulb was one of a number of fly-by-night retail energy suppliers that found its relatively generous fixed rate deals rendered hopelessly uneconomic by soaring wholesale prices. When first put into special administration, the Office for Budget Responsibility estimated that based on energy prices at the time, the bailout could cost the taxpayer an eye-watering £6.5bn. But that tally has steadily eroded, and with further recoveries from Octopus Energy – which acquired Bulb's customer base – the ultimate cost to the taxpayer is expected to be negligible. Nationalisation without compensation is always a process fraught with legal difficulties. Historically, it has tied presiding governments up in knots for years afterwards. But how else is the never-ending saga of Thames Water ever to be resolved? Once freed from the ball and chain of excessive debt, Thames Water could easily be sold back to investors, and with requisite reform to regulation, could then perfectly adequately serve all three interest groups: investors, customers and environmentalists. Time to bite the bullet.
Sky News
3 days ago
- Business
- Sky News
Water industry: Commission finds five areas where 'fundamental change' is needed
"Interlocking failures" in the water sector across England and Wales can be fixed through fundamental reform in five key areas, according to a major interim report. The Independent Water Commission, established last year and led by a former deputy governor of the Bank of England, was scathing of government and regulatory oversight of the industry - long blighted by criticism over performance, particularly over sewage spills and bonuses for bosses. Sir Jon Cunliffe said: "There is no simple, single change, no matter how radical, that will deliver the fundamental reset that is needed for the water sector. "We have heard of deep-rooted, systemic and interlocking failures over the years - failure in Government's strategy and planning for the future, failure in regulation to protect both the billpayer and the environment and failure by some water companies and their owners to act in the public, as well as their private, interest. "My view is that all of these issues need to be tackled to rebuild public trust and make the system fit for the future. We anticipate that this will require new legislation."
The Sun
5 days ago
- Business
- The Sun
Major road in busy town to SHUT for three weeks as water company apologises for delays
A MAJOR road in a busy town is due to close for three weeks, with a water company apologising to locals. The road in Derbyshire will shut for 19 days from tomorrow until June 20. The road is used by buses as well as cars, and is likely to cause issues for those trying to enter a nearby car park. Severn Trent apologised for the delays drivers may experience because of Bank Road in Matlock being closed. The water company said it only carries out work that is "absolutely necessary" when it causes road closures. It said these works are needed to improve the health of the river across the county. The company added that it will help reduce the number of sewage spills within its network. Heavy rainfall often means the pipes struggle and sewage leaks out. Kera Patch, community communications officer at Severn Trent, told DerbyshireLive: 'As part of our work to improve river health, we are conducting some preliminary ground investigations to ensure that our planned installation of a stormwater storage tank under the Lido car park is viable. "To enable our teams to work safely and complete the work quickly, a road closure will be in place along Bank Road from June 2 to June 20. "We know that road closures can be disruptive and we only request them when absolutely necessary to help keep our team and road users safe. "We'd like to apologise for any inconvenience and thank everyone in advance for their patience while we complete these works.' It comes after Thames Water was hit with its largest ever fine over sewage spills. It will pay £104.5million for sewage spills, plus £18.2million for breaking the rules over dividend payments. Watchdog Ofwat slammed the struggling company for 'letting down its customers and failing to protect the environment'. It said Thames had 'routinely and not in exceptional circumstances' released untreated sewage. And, issuing its first fine over shareholder payments, it highlighted one of £37.5million in October 2023 to the firm's holding company — plus another £131.3million dividend from March 2024. 1
BBC News
29-05-2025
- Business
- BBC News
Thames Water fine 'should be spent on River Kennet clean up'
Water quality campaigners say they are delighted at the record £122.7m fine handed to Thames Water, but have said only a complete overhaul of the industry can clean up the UK's company was hit with the fine by regulator Ofwat for repeatedly breaching rules over sewage spills and making payouts to shareholders when it is in dire financial Action for the River Kennett (Arc) said the sum must now be spent on reversing environmental damage caused by years of spills, adding that wastewater infrastructure in the area is in "a desperate state".Thames Water said it takes its responsibility towards the environment "very seriously". The River Kennett is a chalk stream that runs from Avebury down to Reading where it joins the River runs a nature reserve in the area for outreach work and children's education days, which is frequently flooded with flows from nearby treatment works and also regularly spills out of manhole covers, Arc Hitchmough, Arc's director, told BBC Wiltshire: "I hope that these fines from the water companies are ring fenced to undo the environmental damage that's been caused - because Ofwat were clear that the lion's share of that fine was for failure to treat sewage properly." But she warned that as it stands, wastewater infrastructure in the area operated by Thames Water is in "a desperate state".She said the use of emergency measures such as tankers to ferry sewage to treatment works, or temporary treatment units to pump water directly out of sewers for cleaning, were "completely unsustainable"."This isn't the behaviour of a responsible, well run company. This is desperate fire fighting," she said. James Wallace, chief executive of campaign group River Action, said it was good to see the government enforcing sewage laws, but pointed out the fine is only a tiny fraction of Thames Water's £22bn called on the government to put the company "out of its misery" and revoke its licence to Wallace said the government had a number of mechanisms at its disposal to bring Thames Water under its direct control, such as placing it in special he wants to see an end to the privatisation of the water industry."We know that the privatisation experiment since 1989 has failed abjectly because of all the pollution and all of these debts that have accrued," he Wallace said there were numerous models for running water companies such as nationalisation, placing them under the control of local authorities, or turning them into not-for-profit entities."What we need to do is take action," he said. Speaking earlier this year, Environment Secretary Steve Reed agreed that the water sector in England and Wales "urgently needs fixing".But he ruled out nationalisation, saying it would cost up to £100bn, adding that waterways would continue to be polluted while private ownership structures were the government wants private investment to upgrade the sewerage system and the Thames Water fine on Wednesday, Mr Reed added: "The government has launched the toughest crackdown on water companies in history."The era of profiting from failure is over. The government is cleaning up our rivers, lakes and seas for good." 'Already made progress' A Thames Water spokesperson said: "We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows."The dividends were declared following a consideration of the Company's legal and regulatory obligations."Our lenders continue to support our liquidity position and our equity raise process continues."
Times
21-05-2025
- Business
- Times
Jail sentences for bosses of polluting water firms an ‘empty threat'
The introduction of prison sentences for water company bosses who break the law is unlikely to 'put water companies off continuing with business as usual' because the regulator does not have the resources to prosecute them, a campaign group has warned. On Friday the government gave judges the power to jail water firm bosses for up to two years if they cover up sewage spills. However, James Wallace, the chief executive of the campaign group River Action, said: 'The likelihood of this law being enforced is slim. The Environment Agency has too few resources, too little legal expertise, and most importantly, too little access to court time to actually prosecute water companies.' Faced with repeated cuts in the past decade, the Environment Agency has struggled
