Thames Water’s largest shareholder is writing off his investment

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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 Ontario Municipal Employees Retirement System, which has a 31 percent stake in Thames Water, said in accounts filed Friday that it would “make a full write-down of [its] investments to be received and loans with accrued interest’.

Thames Water is struggling with rising interest rates on its £18 billion of debt and needs a £750 million cash injection from its owners by the end of this year to keep it running and make infrastructure improvements.

Britain’s largest utility, which serves 16 million customers, has been embroiled in disputes with regulators over water bills, fines and dividends and has failed to reach an agreement with them on its business plan.

“Now that the major shareholder has written off its 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 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 other holdings of other Omers entities. The write-down would apply to the total 31 percent stake, Omers told the Financial Times.

The Singapore entity submitted its accounts a day after Omers withdrew his representative, Michael McNicholas, from the utility’s board with immediate effect.

Omers’ fund value was approximately £74.5 billion at the end of 2023. Thames Water declined to comment.

“Thames Water is a company with a statutory capital value of £19 billion, £2.4 billion of available liquidity, an annual regulated turnover 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 equality. Safeguards are in place to ensure that customer services are protected, regardless of the issues shareholders face.”

The Universities Superannuation Scheme, the British pension fund that is Thames Water’s second-largest shareholder, declined to comment.

Omers’ decision will increase concerns about Thames Water’s finances. The government has already made 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 into the company after talks with regulator Ofwat, saying the company was “uninvestable”.

Thames Water had asked for a 56 percent increase in bills, including inflation, as well as limits on fines and leniency on dividend rules. Ofwat is due to issue a draft ruling on June 12, but Thames Water’s owners believe the regulator is unlikely to accede to their demands.

Last month, the water company’s parent group, Kemble, defaulted on its debt payments. Kemble’s bonds are now trading at less than 10 percent of face value, implying lenders are also prepared for a total write-down.

If they pull out, Thames Water will look for new investors and drain its cash reserves.

Jeremy Hunt, the chancellor, said last month that the utility must solve its own financial problems and that the government would never insure investors against bad decisions. Omers’ move has not changed the government’s position or accelerated contingency planning, according to people familiar with the situation.

Additional reporting by Anna Gross in London

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