Thames Water - treading water amongst the private equity sharks.
Thames Water, Private Equity, a MOUNTAIN of Debt and Keir Starmers Labour Government. There must be a knock knock joke in there somewhere?
What is the current financial structure?
The organisational framework of Thames Water comprises a regulated operating entity, Thames Water Utilities Limited (TWUL), which is owned by institutional investors within the Kemble Water Group. This group functions under a “whole business securitisation” model, which promotes financial stability and upholds an investment-grade credit rating. Important components of this structure, such as Kemble Water Holdings Limited and Kemble Water Finance Limited, are responsible for managing both debt and equity financing. The principal shareholders include Canadian and UK pension funds, as well as sovereign wealth funds from Abu Dhabi and China, all of which contribute to long-term infrastructure investments.
The current list of external shareholders: [1]
| Who | How much | What they do | When |
|---|---|---|---|
| Ontario Municipal Employees Retirement System | 31.777% | One of Canada’s largest pension plans, with C$105 billion of net assets and global experience managing essential infrastructure | 2017-2018 |
| Universities Superannuation Scheme | 19.711% | A UK pension scheme for the academic staff of UK universities | 2017, 2021 |
| Infinity Investments SA | 9.900% | A subsidiary of the Abu Dhabi Investment Authority and one of the world’s largest sovereign wealth funds | 2011 |
| British Columbia Investment Management Corporation | 8.706% | An investment management services provider for British Columbia’s public sector | 2006 |
| Hermes GPE | 8.699% | One of Europe’s leading independent specialists in global private markets | 2012 |
| China Investment Corporation | 8.688% | One of the world’s largest sovereign wealth funds | 2012 |
| Queensland Investment Corporation | 5.352% | A global diversified alternative investment firm and one of the largest institutional investment managers in Australia | 2006 |
| Aquila GP Inc. | 4.995% | A leading infrastructure management firm and a wholly owned subsidiary of Fiera Infrastructure Inc., a leading investor across all subsectors of the infrastructure asset class | 2013 |
| Stichting Pensioenfonds Zorg en Welzijn | 2.172% | A pension fund service provider managing several different pension funds as well as affiliated employers and their employees | 2006\n\n |
The current state of play:
Thames Water’s financial framework is marked by substantial capital investment, a dependence on debt financing, and robust shareholder backing, all designed to support its extensive infrastructure and enhance service delivery. Nevertheless, the company encounters challenges, particularly with escalating operational costs and elevated gearing ratios, which it seeks to mitigate through careful financial management and innovative green financing strategies.
Elliott Management are getting their hands dirty in UK sewage
Now, its not like the USA to not have their fingers in at least a bit of the pie. Elliott Management, a hedge fund based in the United States and recognised for its assertive investment approaches, has been acquiring Thames Water bonds at discounted rates. Elliott’s focus is on the top-tier bonds of Thames Water, which have become accessible due to the utility’s financial difficulties. These bonds are safeguarded by a regulatory ringfence, providing a degree of protection, although they are trading below their nominal value. Elliott’s investment strategy is predicated on the belief that the market’s outlook on Thames Water’s debt is overly pessimistic and that the company may experience a recovery with minimal losses.
In summary:
Thames Water is significantly burdened by debt, with liabilities exceeding a whopping £16 BILLION, and has faced public backlash regarding its management of environmental concerns, particularly in relation to severe sewage leaks stemming from infrastructure issues.
In any which way you look at it, while Thames water is just about treading water for the time being, if a large scale Private Equity restructure cannot solve the problem, or solve it in a way where the British Tax Payer does not get the short end of the stick, Keir Starmer’s Labour Party maybe be forced to step in and make the already stretched budget stretch just that bit further.