Thames Water, the UK’s largest water supplier, is facing a deep financial crisis that has sparked bailout speculation. The crisis stems from a combination of factors, including soaring debts, chronic underinvestment, and a controversial proposal to hike water bills.
The company’s current financial state is the culmination of a series of questionable decisions made by successive shareholders. Thames Water was privatised in 1989 and has since been acquired by a number of different companies, each of which has taken on more debt. Today, Thames Water’s debts have reached almost £15 billion, a level that has raised concerns about the company’s viability.
Critics accuse successive major shareholders of using debt to pay themselves generous dividends. Macquarie, which owned a stake in Thames Water from 2006 to 2017, has been particularly singled out for criticism. During Macquarie’s time, Thames Water’s debt levels ballooned, and the company operated under a ‘debt-driven’ model.
In addition to its debt problems, Thames Water has also been criticised for underinvesting in its infrastructure. The company’s Victorian-era sewer system is in dire need of repair, and Thames Water has been fined millions of pounds for failing to reduce leaks and slash raw sewage discharges into beaches and rivers.
The situation has become so dire that Thames Water has requested a 44-percent increase in water bills to fund infrastructure and environmental improvements. However, the government has declared that it would be ‘utterly outrageous’ if customers were made to pay for the company’s poor management.
In the event of bankruptcy, the UK government could place Thames Water into ‘special administration’ that would switch it back to public ownership, with taxpayers footing the cost and shareholders wiped out.
