Apparently Thames Water requires more capital. Well, we believe in capitalism so why not, if that’s what it needs? Because the government is deliberately, with malice aforethought, preventing Thames Water from raising more capital.
Of course, it’s possible that the government doesn’t realise this, is instead snookered by its own bureaucracy. If it’s that second then the solution is easy. Simply stop preventing the raising of new capital by putting the bureaucracy back in its kennel and we’re done. If this is all purposeful then that’s something else - one aspect of which would be as with constructive dismissal in employment law. The pain and grief of the compensation payments to those robbed, by policy, of their investments would be large.
The papers are full of the story, Telegraph, Guardian and so on. It’s the FT which gives the crucial clue.
First, OFWAT:
Ofwat has today announced new powers that will enable it to stop the payment of dividends if they would risk the company’s financial resilience, and take enforcement action against water companies that don’t link dividend payments to performance.
The change will require company boards to take account of their performance – for customers and the environment – when deciding whether to make dividend payments. It will also require companies to maintain a higher level of overall financial health.
Then the FT:
The big problem for Thames Water was a rule that from April 2025, regulated opcos couldn’t pay dividends if their credit rating is Baa2(opens a new window)/BBB(opens a new window) with a negative outlook. Since Moody’s has the Thames Water holdco at Baa2 with a stable outlook,
OfWat has deliberately and specifically changed the rules. Thames Water cannot pay dividends - even if it is profitable, it cannot pay dividends. But Thames Water requires more capital, so we are told. Who would put capital into a company that cannot pay a dividend? Even if profitable?
Which brings us to the Telegraph report:
The Ontario Municipal Employees Retirement System, which owns a 32pc stake in Thames, is said to be reluctant to inject fresh capital into the business after a series of poor investments in the UK.
City sources said they were aware that another of Thames’s nine predominantly overseas investors was yesterday also still yet to decide whether to pump in money to save the company, which has 15 million customers.
Hope remains that a deal can yet be done, however. The Universities Superannuation Scheme (USS), Britain’s biggest pension fund and Thames Water’s only UK shareholder, is supportive of injecting fresh money into the business, senior sources added.
Why would foreigners put more capital into Thames Water if the government is deliberately, with that malice aforethought, preventing them from gaining dividends from their investments? Or, of course, government preventing them because government doesn’t understand what its own bureaucracy is doing.
Government, though those changes to the rules at OfWat, has caused this problem. The solution is not for government to make further mistakes, it’s to undo the one already made. If a return can be made on more capital put in then more capital will be put in - the problem of not having enough capital will be solved.
It really is all incredibly simple if only we can get over that near impossible hurdle - of getting government to admit to a mistake which needs to be reversed.