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Thames Water’s largest shareholder has written down its investment in the utility in a sign of the escalating financial crisis at Britain’s largest water company.
A Singapore-registered subsidiary of the Ontario Municipal Employees Retirement System, which holds a 31 per cent stake in Thames Water, said it would “take a full write-down” in its financial statements filed on Friday. [its] “Investment and loan receivable with accrued interest”.
Thames Water is struggling with rising interest rates on its £18bn of debt and needs a £750m cash injection from its owners by the end of this year to maintain operations and deliver infrastructure improvements.
The UK’s largest energy supplier, which serves 16 million customers, has been embroiled in disputes with regulators over water bills, fines and dividends and has been unable to agree its business plan with them.
“With the major shareholder writing off their investment, it is only a matter of time before the government has to take over,” said Tim Whittaker, research director at the EDHEC Infrastructure Institute.
Omers, one of Canada’s largest public sector pension funds, holds its shares in Thames Water through several investment vehicles, including its Singapore-registered company.
Omers Farmoor Singapore PTE owns around a fifth of Thames Water, alongside other shares in other Omers companies. The write-off would apply to the total share of 31 percent, Omers told the Financial Times.
The Singapore company presented its financial statements a day after Omers resigned his representative Michael McNicholas from the utility’s board, effective immediately.
Omers’ fund value was about £74.5 billion at the end of 2023. Thames Water declined to comment.
“Thames Water is a company with a regulatory capital value of £19 billion, available liquidity of £2.4 billion, annual regulated revenue of £2 billion and a new leadership team,” regulator Ofwat said in a statement on Friday. “They must continue to pursue all options to achieve greater equity. There are safeguards in place to ensure services to customers are protected regardless of the issues facing shareholders.”
The Universities Superannuation Scheme, the British pension fund and Thames Water’s second-largest shareholder, declined to comment.
Omers’ decision will increase concerns about Thames Water’s finances. The government has already drawn up contingency plans for the temporary renationalization of the utility, called Project Timber.
Omers and eight other shareholders decided in March not to inject much-needed equity capital into the company after discussions with regulator Ofwat, saying the company was “uninvestable”.
Thames Water had called for a 56 percent increase in bills including inflation, as well as a cap on fines and a relaxation of dividend rules. Ofwat is due to submit a draft decision on June 12, but Thames Water’s owners believe the regulator is unlikely to agree to their demands.
Last month, the water company’s parent company, Kemble, defaulted on its payments. Kemble’s bonds are currently trading at less than 10 percent of face value, meaning the company’s lenders also face a full write-down.
If they withdraw, Thames Water will seek new investors and deplete its cash reserves.
Jeremy Hunt, the chancellor, said last month that the energy supplier had to solve its own financial problems and that the government would never protect investors from making bad decisions. Omer’s move did not change the government’s position or accelerate emergency planning, according to people familiar with the situation.
Additional reporting by Anna Gross in London