plan for collapse of Thames Water

[SupraWez]

They should not be let off the hook and they should also not be allowed to pass any costs onto customer, the regulator needs to do its job and regulate on the customers behalf.

Its a **** show

They have a captive audience / customer and weak regulation and have abused it for too long, if the company fails they should go after the board and anyone trying to jump ship should be pulled back to face justice too, make them accountable.

 

[Blackjack Davy]

OK, and then what......?
What will a water industry run by the current/recent governments actually look like, do you think?

Govt won't touch Thames water they'd be effectively nationalising a colossal amount of debt

 

[ttaskmaster]

Govt won't touch Thames water they'd be effectively nationalising a colossal amount of debt

Given that they already privatised the previous debt to get rid of it, I agree - I can't see any half-sensible government taking a similar debt back.

 

[StriderX]

So what happens when nobody wants it then?

 

[jpaul]

what did/do they use as collateral for the debt/loans - if those were made on questionable basis then can't they be written off, to detriment of company who made loan.

Water always seemed too cheap relative to electricity and gas, like one quarter of their bill, I don't know if other countries have similarly cheap water bills - but you get what you don't pay for.

 

[ttaskmaster]

what did/do they use as collateral for the debt/loans - if those were made on questionable basis then can't they be written off, to detriment of company who made loan.

Operational assets - Pumping stations, treatment plants, office buildings, control stations, machinery, fleet vehicles, land, everything down to the actual pipes in the ground.

They should not be let off the hook and they should also not be allowed to pass any costs onto customer, the regulator needs to do its job and regulate on the customers behalf.

That horse has long since bolted, taking the money with it.
You're basically holding TW on the hook for money that someone else took.

They have a captive audience / customer and weak regulation and have abused it for too long, if the company fails they should go after the board and anyone trying to jump ship should be pulled back to face justice too, make them accountable.

The board do not make these calls. This is down to the owners and their investors, which were allowed to to this by the regulator.

 

[darkgen]

I'd still argue that if nationalisation was on the table; the government of the day could use creative means / legislation (e.g. new licensing buyback conditions) to purchase all assets, at current market face value (minus loans / debt). Investors / shell companies, bond holders and whoever else can then fight through the courts on who gets what from the sale.

 

[adam cool dude]

I am no expert about the ins and outs of this but why can't the government let the whole thing fail. Buy the assets at market value then the private investors can fight it out between them for the cash that is left over in the courts?

Thames water assets are worth 19 billion according to google. I think to date the UK has pledged near enough that figure to Ukraine so they could easily do it if they wanted to.

 

[b0rn2sk8]

That’s exactly what will happen… if they collapse and they haven’t collapsed yet..

 

[200sols]

Some debt is secured against the assets.

People think of a 'rescue' as shareholders being bailed out when this is not the case, they would wiped out entirely.

 

[Shoza]

Some debt is secured against the assets.

People think of a 'rescue' as shareholders being bailed out when this is not the case, they would wiped out entirely.

The security is worthless. Who’s going to buy a standalone Thames Water pumping station. It has a very limited market and very limited income. Letting it collapse and/or a pre-pack administration where a new company purchases the business at face value is the best outcome.

 

[ttaskmaster]

I'd still argue that if nationalisation was on the table; the government of the day could use creative means / legislation (e.g. new licensing buyback conditions) to purchase all assets, at current market face value (minus loans / debt).

They could, but it would be a costly move...

I am no expert about the ins and outs of this but why can't the government let the whole thing fail. Buy the assets at market value then the private investors can fight it out between them for the cash that is left over in the courts? Thames water assets are worth 19 billion according to google. I think to date the UK has pledged near enough that figure to Ukraine so they could easily do it if they wanted to.

Thames Water was valued at £7 Billion when Macquarrie purchased it. They sold it for £8 Billion.
Around 80-90% of those assets are security for debt, so even if they're to be sold it will cost the government a small fortune.
The government would then be obliged to fund the necessary investment to repair the infrastructure, which will cost them a big fortune. They will then also have to invest even more money in reorganising the company, its funding, its finance streams for CAPEX and OPEX, salaries for the 9500-odd employees, negotiate new contracts with suppliers and contractors while also paying them anything that's owed on things like Tideway and VMR.

The security is worthless. Who’s going to buy a standalone Thames Water pumping station. It has a very limited market and very limited income. Letting it collapse and/or a pre-pack administration where a new company purchases the business at face value is the best outcome.

You'd get the business, but not the assets.
Whoever takes over the running of the service would have to pay whoever owns the assets, kinda like how ISPs pay BT Openreach for using their network. That means income for whoever buys the pumping station, or takes ownership in the event that the loan secured on it is defaulted upon.

 

[darkgen]

They could, but it would be a costly move...

No doubt but less expensive than also inheriting any loans or debt racked against the infrastructure as well. I cannot fathom how this sort of operation would ultimately long-term be more expensive to the customer than the current situation. Evidently privatisation has seemingly been more costly than nationalisation, whether through a demonstration that running and investing in a water provider has been more costly than the revenue it generates or as most people seem to think, through blatant corporate greed and creative malpractice (or both).

Reset the situation as on the day of the initial privatisation, inject initial investment via a government welfare fund / bond and then actually boil all revenue in to the service (CAPEX / OPEX). No doubt, any public body responsible for that would balls it up but a change of ideology every 30 or so years may not be a bad punt.

Radical thinking is required.

 

[ttaskmaster]

No doubt but less expensive than also inheriting any loans or debt racked against the infrastructure as well.

The company is valued at around £9bn. Debt is around £14bn. The asset value is around £19bn.
The key aspect is control of the assets, as without that you can't really do much in terms of controlling the company, altering the infrastructure or anything useful.
Corbyn wanted to force-purchase the whole industry at 30% of market value, but I imagine that would not be a good idea for anyone wanting to remain in power.

I cannot fathom how this sort of operation would ultimately long-term be more expensive to the customer than the current situation.

As above, it's not just the cost of purchasing but also those of restructuring and changing things over.

Evidently privatisation has seemingly been more costly than nationalisation, whether through a demonstration that running and investing in a water provider has been more costly than the revenue it generates or as most people seem to think, through blatant corporate greed and creative malpractice (or both).

Privatisation was great up until the regulator allowed the owners to basically take all the money needed to run the company.
The industry was never meant to be run purely for profit, let alone maximum profit.

Radical thinking is required.

But that would require OFWAT actually getting up off its backside and doing its job....
Everything else would ned the government to pay a shedload of money into buying and fixing the company, again as detailed above, which would still ultimately come out of your pocket.

 

[StriderX]

There's no point trusting regulators when the next time they'll just get sabotaged again.

A permanent solution is needed.

 

[darkgen]

The company is valued at around £9bn. Debt is around £14bn. The asset value is around £19bn.
The key aspect is control of the assets, as without that you can't really do much in terms of controlling the company, altering the infrastructure or anything useful.
Corbyn wanted to force-purchase the whole industry at 30% of market value, but I imagine that would not be a good idea for anyone wanting to remain in power.


As above, it's not just the cost of purchasing but also those of restructuring and changing things over.


Privatisation was great up until the regulator allowed the owners to basically take all the money needed to run the company.
The industry was never meant to be run purely for profit, let alone maximum profit.


But that would require OFWAT actually getting up off its backside and doing its job....
Everything else would ned the government to pay a shedload of money into buying and fixing the company, again as detailed above, which would still ultimately come out of your pocket.

I completely concede it will ultimately be the tax payer on the hook for all of this. MY point here is that the attitude seems to favour a holding pattern, like the failed energy suppliers. Allow the practice is continue in privatised hands and then up the "standing charge" for water, so the cost of this is swallowed by all water customers as a whole but to what end.

A rework of the regulator / government / licensing and operating legislation with real penalties and caveats which legally allow buyback of assets at a reduced or price based on actual value seems entirely reasonable but somehow this rationale is beyond the pale or radical!

I accept this is overly simplified but the current situation seems wedded to impotency, which would not be my favoured choice.

 

[ttaskmaster]

I completely concede it will ultimately be the tax payer on the hook for all of this. MY point here is that the attitude seems to favour a holding pattern, like the failed energy suppliers. Allow the practice is continue in privatised hands and then up the "standing charge" for water, so the cost of this is swallowed by all water customers as a whole but to what end.

In basic terms, it means the government doesn't have to pay for all the takeover, reorganisation, restructuring of regulation, and the cost of infrastructure investment as well as not taking on the responsibility for the mess the industry is in.

In short, MacQuarries nicked all of Thames Water's money and it appears the government has no legal recourse to reclaim it.... although that is an assumption, based on the fact that MacQuarries are sailing merrily away scot-free... so now someone has to refill the coffers and there aren't many options for that.

A rework of the regulator / government / licensing and operating legislation with real penalties and caveats which legally allow buyback of assets at a reduced or price based on actual value seems entirely reasonable but somehow this rationale is beyond the pale or radical!

Record-breaking penalties have already been levied, but they did nothing to help the situation. Board members can be (and have been) fired at the drop of a hat, but that only mildly impacts the running of the company, not the finances of the owners or investors.
Asset buy-back only affects the investors and does not generate income or lessen debt. Forced-purchase at reduced value can heavily impact investors, which includes the pension funds of British citizens.

It seems reasonable, sure, but it's a bit more complex than just doing XYZ.

I accept this is overly simplified but the current situation seems wedded to impotency, which would not be my favoured choice.

Target the regulator first. They're the teeth that should have been biting in long ago.
Operating legislation is another good start, but needs a company that can afford to comply - The EA has been increasingly demanding more investment from the industry, while OFWAT has been increasingly restricting the amount they can spend on investment.

 

[darkgen]

Record-breaking penalties have already been levied, but they did nothing to help the situation. Board members can be (and have been) fired at the drop of a hat, but that only mildly impacts the running of the company, not the finances of the owners or investors.
Asset buy-back only affects the investors and does not generate income or lessen debt. Forced-purchase at reduced value can heavily impact investors, which includes the pension funds of British citizens.

This is an aspect that that a needs a serious blunt approach. Investors need to know loss; irrespective whether its pensions funds or not. It would seem to me a necessary penalty, a demonstration for all involved in this sector and others in the public sphere that if you bleed a company to collapse, everyone loses. As I think I posted several months back, yes the regulator needs to regulate but companies also need to act in good faith and within the legal framework of whatever licensing and operating conditions they sign-up too (how difficult can it really be to change these whether in situ or upon renewal).

I get it, I really do. I understand and know in part some of the history, which is why the continual seemingly "do nothing to fix" approach frustrates me.

 

[Shoza]

Public services sold private should have a public golden share retained, so the Government can also vote down anything that would be bad for the public. Lots of instances of this working well.

 

[Reuben klang]

Public services sold private should have a public golden share retained, so the Government can also vote down anything that would be bad for the public. Lots of instances of this working well.

Which would basically be everything.