Will you be providing the source that the shareholders are the ones who refused the deal or not?
plan for collapse of Thames Water
- Thread starter Mrwong
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I can’t see how that is any ‘better’ than just having a well run public service, ultimately you are still privatising profits unnecessarily and holding all the risk in the public sector.
Not really, the bus companies own all the vehicles, depots and take far more risk as part of operating the service.
The train companies owned none of the essential assets or essential infrastructure, they don’t own the stations, or even the offices the back office staff work out of.
You said public ownership, I assumed the main infrastructure is publicly owned.
As noted above, outsourcing metering and billing doesn’t add any value and privatises profits while retains risk in the public sector - as you say, the contractor can disappear overnight.
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Soldato
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I already have - KKR's bid was contingent on shareholders writing off their debt. Only one has done so. By not doing this, those shareholders have forced KKR to withdraw.
Private investment brings more money than government borrowing and bugetary portioning, and much of the operational/financial risk transfers to the private sector, which gives them the incentive to deliver and operate efficiently.
It varies between regions. Either way, most services are government-owned.
Owned yes, but who's gonna operate it? Who's going to collate all the data, issue the bills, analyse performance and implement necessary interventions?
That's why we have profit-share agreements in the contracts.
It doesn’t though does it? Private investors want a bigger return than it costs government to borrow, that alone means you are already starting at a higher cost base for the same thing.
Don’t forget the investors could just lend the money directly to government, they’d get a lower rate but the risk of not getting a return is much lower, hence the risk premium in direct investment.
On the other hand, business risk doesn’t transfer to the private sector, the private sector can just walk away at the end of the contract or when the going gets tough. We’ve seen it time and time again.
You haven't, you've just stated your opinion and you've again restated it here.
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Soldato
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Depends on the industry. Things like water have always been long-term low risk investments, which is why pension funds were attracted to it.
Which then increases the cost to the government, which is instead saved by private efficiencies necessitated by competition.
Government retains some risk, but most of it does indeed transfer over to whoever has the greater control over the risk.
KKR have refused to comment. Shareholders have refused to comment. The rest is just established fact.
KKR already held up their side when they submitted their proposal and turnaround plan. The only thing that would impact that is if another stakeholder did not hold up their side...
Nope. As I said other factors have changed including political risk which have changed the investment case as well and the the line coming out is KKR walked away rather than shareholders blocked the deal. Its not simply a case of what you claim, you may well be right but I just asked you to back it up with a source.
Soldato
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The political situation is the same as it's always been. The Cunliffe Review simply reiterated what everyone already knew and has been saying for several years.
There won't be anything to say shareholders deliberately blocked the deal, especially as some likely couldn't afford the loss so were unable to meet the write-off criteria, but it remains the only reason a company that had already done it's part would now pull out.
Soldato
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Its probably a combination of factors. The FT article cites political risk (regulatory change over a long period is likely coming), the recent £123m fine that was imposed (potential for big fines is going to spook any investor), and difficulty getting the agreement of all current stakeholders.
Can't blame them really. Imagine coming in as a new equity investor to a company holding billions in debt and needing billions more capital immediately, which is likely to be incurring regulatory performance fines, an imminent CMA appeal, constrained or no dividend returns, and unable to secure any regulatory/government guarantees to mitigate these risks...would run a mile and they have.
Proves they have done their due diligence at least, something the previous investors who Macquarie sold onto didn't and they lost their investment because of it.
FT said:
FT said:
FT said:
Can't blame them really. Imagine coming in as a new equity investor to a company holding billions in debt and needing billions more capital immediately, which is likely to be incurring regulatory performance fines, an imminent CMA appeal, constrained or no dividend returns, and unable to secure any regulatory/government guarantees to mitigate these risks...would run a mile and they have.
Proves they have done their due diligence at least, something the previous investors who Macquarie sold onto didn't and they lost their investment because of it.
Thames water in Uninvestable. You would be crazy to put money in.
Soldato
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Or really smart.... like, you'd have to know Business stuff and, like, submit plans to turn around the company.... Must be why five different businesses were bidding for it.
Soldato
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I've yet to fully understand why it's treated and run like a business when it's an essential service, with no competition.
Soldato
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Privatised it to raise the capital needed to repair the deterioration, resulting from the preceeding Labour governments' mismanagement and failure to invest in its maintenance.
This and privatisation wasn’t the only answer. The government themselves could have invested but privatisation was the convenient option because it kept them off balance sheet.
It ultimately enabled the Conservative government to continue to spend while lowing taxes and the total mess we have today we have with crumbling, inflexible infrastructure is the result.
Soldato
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I think there were other reasons. Some of these essential public monopolies were difficult to reform within a nationalised structure. Over manning and incredibly generous pensions were never going to be fixed in a nationalised framework. The power industry lost 30% of staff with no noticeable difference according to friends of mine who worked in it at the time. But water was probably a bridge too far. It is such a natural monopoly privatisation was just an opportunity for the unscrupulous to extract value at the tax payers risk, likewise electricity DNO's. De-nationalisation was required, because the state had it fingers in industries it had no need to be involved in, but plainly it went to far.
For me I think water should be same as tax.
A cheap rate which covers essentials.
A normal rate to cover normal usage.
Then a steep rate for people with swimming pools.
As water becomes more and more precious and costs to purify it ramp up the cost has to go up.
A cheap rate which covers essentials.
A normal rate to cover normal usage.
Then a steep rate for people with swimming pools.
As water becomes more and more precious and costs to purify it ramp up the cost has to go up.
Soldato
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This only became a problem when private equity started buying water companies in the mid 2000's. Before that they were all listed on the stock exchange, and whilst dividends etc were still paid out, these weren't excessive and company Boards weren't under the thumb of a single investor.
The issue isnt privatisation, it is private equity firms.
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Some of the worst offenders are still listed.