Thames Water’s biggest investor has slashed the value of its stake in the company to zero in the latest sign of an escalating financial crisis for Britain’s biggest water supplier.
The Canadian pension fund Omers issued a “full writedown” of its 31.7% stake in Thames’s troubled parent company in its annual report published on Friday, signalling that it believes its share is worth nothing.
The latest blow to the water supplier, which serves about a quarter of the UK’s population, marks a precipitous decline for a company that Omers valued at £700m at the end of 2022 and £990m at the end of 2021.
Omers signalled that Thames is now worthless a day after Michael McNicholas, a managing director at Omers Infrastructure, quit his role as non-executive director of Thames Water.
The decision to raze the value of Thames has emerged weeks after Omers, and the company’s other shareholders, refused to give the company £500m of emergency funding after branding its business plan “uninvestable”.
Alongside Omers, Thames shareholders include the British university staff pension scheme USS and the BT Pension Scheme manager Hermes. None have taken a dividend from Thames since they bought into the business in 2017.
The water company is now racing to avoid a multibillion-pound taxpayer-backed bailout after its parent company, Kemble, defaulted on its debt, raising fears that the company could face a significant restructure or even collapse.
Thames could be placed into special administration, which would result in the government stepping in and temporarily renationalising the company. This outcome would probably fuel critics of the Conservative government who argue the water company’s plight represents the failure of Margaret Thatcher’s privatisation agenda.
The Guardian revealed last month that under radical plans being drawn up in Whitehall, codenamed Project Timber, ministers would turn Britain’s biggest water company into a publicly owned arm’s-length body.
The plans, overseen by Defra and the Treasury, a new public corporation would be formed to hold the water monopoly, modelled on the company that built the £18.8bn Crossrail project, while Thames’s vast liabilities would be assumed into the government’s debt pile.
The water regulator, Ofwat, is reportedly working on rescue plans for Thames that could lead to the water company’s regional monopoly being dismantled and sold off to neighbouring rival suppliers under a scheme codenamed Project Telford.
Ofwat has tasked the former private equity banker Adrian Williams with overseeing the rescue bid, according to the Telegraph, in a last-ditch attempt to save the company from collapsing under the weight of a more than £15bn debt pile.
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Under the plan, Thames could be split into two smaller suppliers: one covering London and the other supplying water services to Thames Valley and Home Countries regions. The company may end up being split up into as many as “a dozen” smaller companies, according to the report.
An Ofwat spokesperson said: “Safeguards are in place to ensure that services to customers are protected, regardless of issues faced by the shareholders.”
The strain on Thames’s finances was laid bare last month in a revised plan submitted by the water company to Ofwat, which revealed that the annual interest bill on its borrowings is expected to rise to about £3bn by 2030.
Thames was privatised in 1989 with no debt. In the decades since the water supplier has taken on more debt to help fund its infrastructure projects while paying large dividends to investors, most notably the Australian investment bank Macquarie.
The government was approached for comment.