Thames Water

[beorhthelm]

How are they following the rules if they pay zero Corp tax whilst making huge profits and dividend payments?

Didn't think dividends offset Corp tax

usually becuase its operating profits, not a net cash surplus, from which debt payments, investment and other numbers are subtracted. dividends can be paid regardless of profit, either operating or cash.

something odd about the latest news, £14bn debt and budget blackholes. that debt is there in their accounts, growing a bit each year, its not a sudden revelation. also share price bearly reacted. something else afoot or gross misreporting.

 

[Jim in the West]

A private company is run for the benefit of its shareholders.
Not employees, or the public.
Privatisation of water, gas and electric, the railways, may have made these operations more efficient but not for the benefit of us ordinary folk.
Unless there are such stringent controls that limit their powers to benefitting the public not their shareholders
Are there haven’t been enough controls
Capitalism in a nutshell innit.

There is absolutely no reason why it should be "Public = Good, Private = Bad". Not all water companies were in public ownership prior to the massive privatisation in 1989, and not all water companies are now private. A few years ago I worked for Bristol Water, which has ALWAYS, throughout its 177 history, been a privately run company. We had very high levels of customer satisfaction and a fantastic customer-focused ethos within the company. And the water companies in Wales and Scotland do not have external shareholders...they are public-benefit, not-for-profit companies. And if you look at the customer satisfaction stats, Welsh Water and Scottish Water don't have any better customer service metrics than privatised water companies. In my view, and my experience of working in a whole range of industries, the quality of management (and staff) makes a huge difference to the customer experience.

But there ARE some fundamental issues in the water industry which have conspired to generate poor outcomes for customers. One very simple one is that, for at least the last decade, the government has put huge pressure on the regulator (Ofwat) to keep customer bills down, at the expense of investment. The incredibly complex 5 year pricing review process determines how much a water company can charge you, and how much the company can invest in infrastructure. Ofwat has (reacting to government pressure) systematically reduced the investment plans of water companies in order to keep water bills as low as possible.

 

[Harry Wilson's tackle]

Water supply shouldn’t even be privately owned anyway. It’s a vital service. It’s not even like there’s competition.

Precisely.

Thames Water going bust and yet it has paid out insane amounts in shareholder dividends. The tory government will step in with oodles of taxpayers money to bail them out, then in year or so 'sell' it back to private 'industry' at a pittance.

Only because of privatization, which the public seemed to lap up under Thatcher, is it possible for the tories to rinse the public by diverting tax income to bail out private interests. What mugs we have become (the British Public).

And a tory will be along soon to explain how this is all right and proper, makes economic sense in the long term, and whatabout Jeremy Corbyn.

 

[Harry Wilson's tackle]

There is absolutely no reason why it should be "Public = Good, Private = Bad". Not all water companies were in public ownership prior to the massive privatisation in 1989, and not all water companies are now private. A few years ago I worked for Bristol Water, which has ALWAYS, throughout its 177 history, been a privately run company. We had very high levels of customer satisfaction and a fantastic customer-focused ethos within the company. And the water companies in Wales and Scotland do not have external shareholders...they are public-benefit, not-for-profit companies. And if you look at the customer satisfaction stats, Welsh Water and Scottish Water don't have any better customer service metrics than privatised water companies. In my view, and my experience of working in a whole range of industries, the quality of management (and staff) makes a huge difference to the customer experience.

But there ARE some fundamental issues in the water industry which have conspired to generate poor outcomes for customers. One very simple one is that, for at least the last decade, the government has put huge pressure on the regulator (Ofwat) to keep customer bills down, at the expense of investment. The incredibly complex 5 year pricing review process determines how much a water company can charge you, and how much the company can invest in infrastructure. Ofwat has (reacting to government pressure) systematically reduced the investment plans of water companies in order to keep water bills as low as possible.

I know you're no raving tory, Jim, so I'll take note of that.

Whatever the full story, it isn't Scottish or welsh water that's going bust.

 

[Bold Seagull]

usually becuase its operating profits, not a net cash surplus, from which debt payments, investment and other numbers are subtracted. dividends can be paid regardless of profit, either operating or cash.

something odd about the latest news, £14bn debt and budget blackholes. that debt is there in their accounts, growing a bit each year, its not a sudden revelation. also share price bearly reacted. something else afoot or gross misreporting.

Is it more the case that their debt, like many mortgage holders is coming to the end of a fixed rate term at 1.5% and finding their next mortgage is going to be 5.5%? The debt isn't a sudden revelation, but the jump in repayments is. Balance sheet becomes a bit frightening if they've hit a point of refinancing.

 

[Jim in the West]

usually becuase its operating profits, not a net cash surplus, from which debt payments, investment and other numbers are subtracted. dividends can be paid regardless of profit, either operating or cash.

something odd about the latest news, £14bn debt and budget blackholes. that debt is there in their accounts, growing a bit each year, its not a sudden revelation. also share price bearly reacted. something else afoot or gross misreporting.

Yes, there is something slightly odd about the reported "black hole"...but the problem relates to interest rates. A lot of debt within water companies is RPI-linked, so what's happened over the last 12 months or so has meant water companies' interest costs have zoomed up.

All water companies have financial year ends of 31st March, which means Thames Water's accounts for the 2022/23 will be in the process of finalisation, and due to be published imminently. My guess is that the auditors haven't been able to sign off on the "going concern" basis, due to the level of debt interest going forward. This would be pretty catastrophic, and would probably explain why the CEO has stepped down (why the CFO hasn't also stepped down is interesting....maybe he's agreed to stay on for a short period to manage a transition....it'll be essential to have someone in post who understands the finances. But he must, presumably, carry a significant part of the blame).

Logically, TW should have refinanced some of its RPI-linked debt, but that would almost certainly have been incredibly difficult (and costly), as would interest-rate hedging. But now, the solution appears to be a massive cash injection by the shareholders (mainly overseas pension funds) in order to allow the auditors to sign off the accounts, and get the regulator comfortable.

All the above is guess work, by the way!

PS: The price of Thames Water debt fell by almost 50% on Monday!

 

[Jim in the West]

I worked in the Gas industry - British Gas - until 1983. When they started privatising things, I just had an immediate feeling that it was wrong - immoral even - for the basic utilities like gas, electric and water to be privatised.

But of course privatisation was going to free them all up to raise money in creative ways to give us a much better service all round and probably cheaper…….. er, but people will expect to make a profit out of this!

And then I remember when Railtrack was reprivatised, there were people bleating that this was their pension money and it was not right that their future should be mucked around with like this! I thought at the time “these are shares, you idiot. shares inherently carry an element of risk. If you’re not prepared to take that risk, you DON’T buy shares. If the privatisation has been bungled and the whole thing has been s disaster, then tough. You lose out!”

so of course now all the pension funds and international institutions that invest in things like Thames Water will either be stumping up the readies to rescue things or will be seeing their huge investments go the way of all flesh! Right, yes….. as if! the British taxpayer and/or the customers will bear the brunt of all this while all the clever accountants and business people will be riding off in to the sunset having made their fortunes.

It makes me sick! Very angry. And as usual, it’s all Thatcher’s fault!

David, I feel your pain!! But I very much doubt in this case that the taxpayer will pick up the bill. The shareholders will either have to fill the "black hole" with very significant capital injections, or TW will effectively be nationalised, and the shareholders would lose their entire investment.

 

[DavidinSouthampton]

David, I feel your pain!! But I very much doubt in this case that the taxpayer will pick up the bill. The shareholders will either have to fill the "black hole" with very significant capital injections, or TW will effectively be nationalised, and the shareholders would lose their entire investment.

We shall see. i hope you’re right, and think you should be!

 

[Peteinblack]

 

[Baldseagull]

I worked in the Gas industry - British Gas - until 1983. When they started privatising things, I just had an immediate feeling that it was wrong - immoral even - for the basic utilities like gas, electric and water to be privatised.

But of course privatisation was going to free them all up to raise money in creative ways to give us a much better service all round and probably cheaper…….. er, but people will expect to make a profit out of this!

And then I remember when Railtrack was reprivatised, there were people bleating that this was their pension money and it was not right that their future should be mucked around with like this! I thought at the time “these are shares, you idiot. shares inherently carry an element of risk. If you’re not prepared to take that risk, you DON’T buy shares. If the privatisation has been bungled and the whole thing has been s disaster, then tough. You lose out!”

so of course now all the pension funds and international institutions that invest in things like Thames Water will either be stumping up the readies to rescue things or will be seeing their huge investments go the way of all flesh! Right, yes….. as if! the British taxpayer and/or the customers will bear the brunt of all this while all the clever accountants and business people will be riding off in to the sunset having made their fortunes.

It makes me sick! Very angry. And as usual, it’s all Thatcher’s fault!

As the major shareholders, the pension funds and other institutions could have told the company that they were not happy with the debt ratio, and take a lower dividend, so if they get f***ed over, it is their fault.

 

[beorhthelm]

a rabbit warren of corporate companies behind Thames Water. they were bought out from RWE (nice Germany utility co) in 2006 with a lorry load of debt. i'd hazard a guess that group own most the debt, otherwise not sure i understand why they'd set this up (as share holders they lose everything if it goes wrong).

 

[Thunder Bolt]

 

[Doonhamer7]

So this ties in with how the finance sector screws us all, I’m sure I read that the global debt in now greater than the value of global assets because of the cintued selling on and leveraging of debt. Thames Water customers will probably be ok but if your a pensioner of BT or a University Lecturer or someone working for Ontario / BC state you could be about to see a large chunk of your pension go pop

 

[pb21]

a rabbit warren of corporate companies behind Thames Water. they were bought out from RWE (nice Germany utility co) in 2006 with a lorry load of debt. i'd hazard a guess that group own most the debt, otherwise not sure i understand why they'd set this up (as share holders they lose everything if it goes wrong).

Am I just being incredibly wet behind the ears, or is this not stupid and 'shouldn't' be allowed to happen?

 

[Doonhamer7]

Am I just being incredibly wet behind the ears, or is this not stupid and 'shouldn't' be allowed to happen?

No you’re not, some of the finial engineering is so morally wrong and it should be stopped. I don’t know of all the facts without looking it up but if you look at Philip Green (bhs/top shop infamy) he went and bought successful companies with low debt which owned their assets (shops), He then borrowed the money to buy them, then transferred the money he had borrowed as debt onto the business (so it’s now heavily geared), sold / spun off the assets and pocked the money (so now shops are paying higher rent). result a business with huge debt (which in long term it can’t pay) and increased running costs = bankrupcy and the only winner is…..

this happens with a number of investment companies - gear up business with debt, strip the assets, then move on with no care for the damage done. No UK govt will have the balls to stop this

 

[Randy McNob]

 

[Weststander]

Thames Water’s in deep financial sh1t (like the water it pollutes), looking to borrow even more from investors, already £18.3bn. This stems from the Maquerie ownership dividends scam from 2006 to 20167, where they increased TW borrowing by £7.3bn to partly pay out £2.8bn in dividends. Dividends in their ownership were 3x greater than before, 5x greater than since.

The weight of debt and interest makes it difficult for TW to invest adequately for climate change and its effect of sewage pumped into waterways.

The share price has crashed. It wouldn’t cost much for a nationalisation …. over to Labour when they take power.

 

[Pevenseagull]

No you’re not, some of the finial engineering is so morally wrong and it should be stopped. I don’t know of all the facts without looking it up but if you look at Philip Green (bhs/top shop infamy) he went and bought successful companies with low debt which owned their assets (shops), He then borrowed the money to buy them, then transferred the money he had borrowed as debt onto the business (so it’s now heavily geared), sold / spun off the assets and pocked the money (so now shops are paying higher rent). result a business with huge debt (which in long term it can’t pay) and increased running costs = bankrupcy and the only winner is…..

this happens with a number of investment companies - gear up business with debt, strip the assets, then move on with no care for the damage done. No UK govt will have the balls to stop this

That's SIR Philip Green (still)

 

[Papa Lazarou]

Thames Water’s in deep financial sh1t (like the water it pollutes), looking to borrow even more from investors, already £18.3bn. This stems from the Maquerie ownership dividends scam from 2006 to 20167, where they increased TW borrowing by £7.3bn to partly pay out £2.8bn in dividends. Dividends in their ownership were 3x greater than before, 5x greater than since.

The weight of debt and interest makes it difficult for TW to invest adequately for climate change and its effect of sewage pumped into waterways.

The share price has crashed. It wouldn’t cost much for a nationalisation …. over to Labour when they take power.

I can't see how a company that is obliged to invest in infrastructure and improving the quality of our water, with that amount of debt, can survive.

Is letting the company fail and taking it back into state ownership a viable option? After all the shareholders have been receiving dividends for years based upon a lie. Plus shares might be considered low risk investments, but even the largest companies can fail.

 

[Weststander]

I can't see how a company that is obliged to invest in infrastructure and improving the quality of our water, with that amount of debt, can survive.

Is letting the company fail and taking it back into state ownership a viable option? After all the shareholders have been receiving dividends for years based upon a lie. Plus shares might be considered low risk investments, but even the largest companies can fail.

I had a look at their accounts, they’re awful, but the damage is painted over by large property sales of £1.6bn in 2023.

They’ll probably stumble long because if the shareholders (they include uni pension funds for example) can’t afford them to fail …. as they’d be writing off their entire spend. I suppose any government would ultimately save the operation.