Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Thames Water’s biggest shareholder has written off its investment in the utility in a sign of the escalating financial crisis at the UK’s largest water company.
A Singapore-registered subsidiary of Ontario Municipal Employees Retirement System, which holds a 31 per cent stake in Thames Water, said in accounts filed on Friday it would make “a full writedown of [its] investment and loan receivable with accrued interest”.
Thames Water has been struggling with rising interest rates on its £18bn of debt and needs a £750mn cash injection from its owners by the end of this year to keep running and deliver infrastructure improvements.
The UK’s biggest utility, which serves 16mn customers, has been embroiled in disputes with regulators over water bills, fines and dividends and has failed to reach an agreement with them over its business plan.
“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 biggest public sector pension funds, holds its stake in Thames Water through multiple investment vehicles including its Singapore-registered entity.
Omers Farmoor Singapore PTE owns about a fifth of Thames Water in addition to further stakes held by other Omers entities. The writedown would apply to the overall 31 per cent stake, Omers told the Financial Times.
The Singapore entity filed its accounts a day after Omers withdrew its representative, Michael McNicholas, from the utility’s board with immediate effect.
Omers, whose fund value at the end of 2023 stood at about £74.5bn, confirmed the full writedown. Thames Water declined to comment.
The Universities Superannuation Scheme, the UK pension fund that is Thames Water’s second-biggest shareholder, did not immediately respond to a request seeking comment.
Omers’ decision will compound concerns over the finances at Thames Water. The government has already made contingency plans for the utility’s temporary renationalisation, dubbed Project Timber.
Omers and eight other shareholders decided in March not to inject much-needed equity into the business after discussions with regulator Ofwat, saying that the company was “uninvestable”.
Thames Water had asked for a 56 per cent increase in bills including inflation, as well as limits to regulatory fines and leniency on dividend rules. Ofwat is due to produce a draft ruling 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 group, Kemble, defaulted on its debt. Kemble’s bonds are now trading at less than 10 per cent of face value, implying that its lenders are also braced for a total writedown.
If they withdraw, it will leave Thames Water seeking new investors and running down its cash reserves.
