By Harry Mottram: One of Britain’s largest utility firms is on the brink of collapse as the economy continues to be hit by hikes in interest rates forcing up the cost of servicing debts. Thames Water’s debt mountain of £14 billion is unsustainable in the current climate with around two billion or so annually in revenue and despite the owners pumping in cash to get it through its initial crisis it is hard to see how the company as it exists can survive long term. It’s been widely reported that the Government may step in as it did when energy firm Bulb went under last year and essentially take it into public ownership, settling the debts and then seeking a buyer to take it on as a going concern. It is owned by a consortium of outfits including a Canadian pension fund, the UK pension fund for university staff, a Middle East Investment group, an Australian investment firm, a Chinese corporation and Hermes GPE amongst other small groups.
A list of creditors is long and varied from contractors to office cleaners and from printing companies and signage makers to employment agencies – with the bulk of what’s owed coming from lenders. Despite the eye-watering debts it didn’t stop the recently departed CEO Sarah Bentley resigning this week from £1.6 million pound job and the shareholders scooping £1.4 billion pounds in the last financial year. The firm has been hit by a number of scandals from polluting rivers and beaches with raw sewage to overcharging customers and has been heavily fined by the courts as a result.
Under the Margaret Thatcher administration it was privatised in 1989 and since had a number of owners and takeovers as water is generally seen as rock solid investment. As one wag noted it’s the only business where its product is dropped free from the sky and all they’ve got to do is package it up and pump it to their customers on infrastructure provided by previous owners. Incredibly the firm can be traced back to the early 17th century as London grew and needed clean water supplies. It has had a variety of owners and regulators since then including the Thames Conservancy and the Metropolitan Water Board, before privatisation when it was the Thames Water Authority.
Critics believe it should be returned to public ownership and instead of paying executives live finance director Alastair Cochran his £700,500 salary, the share holders vast dividends for a firm that makes an annual loss of millions the cash should be reinvested to prevent leaks and end pollution. Thames Water have put in £500 million pounds to upgrade their infrastructure and plan more, but it may not end up being a decision for their management team if the firm folds. Reports suggest the firm will be put into a special administration regime (SAR) by the Government so in the end the taxpayer will pick up the bill.
Ian Carrotte of ICSM said there is a real concern for the creditors who supply the giant utility firm who could end up not being paid. His advice is to chase up payment for any invoices with Thames Water that are overdue and don’t take ‘no’ for an answer.
Picture from Sky News.
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ICSM, The Exchange, Express Park, Bristol Road, Bridgwater, Somerset TA6 4RR. Tel: 0844 854 1850. www.icsmcredit.com. Ian.carrotte@icsmcredit.com