plan for collapse of Thames Water

bloodiedathame said:
I didn't know this but 'shareholders have not received a dividend from the business since 2017'

news.sky.com

Nationalising Thames Water would not serve the public well

After shareholders row back on promised funding, what next for the troubled Thames Water?
news.sky.com news.sky.com
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This article seems to be in conflict with a myriad of others were dividends or bonuses have been paid and the regulator even levelling fines. Whether through creative accounting, diverting or shifting operational costs upwards to the parent company Kemble, who perhaps then in turn mask these as profit based on "something".

I'm not convinced income from customers bills is insufficient to run and develop the company. I am convinced that the income has been mismanaged, misdirected and misappropriated in favour of the privatised entities. A cursory glance suggests UK water costs are an average in Europe with other countries being significantly higher. Then again, the unique water model for the UK may askew any true service comparison.
 
Dis86 said:
The issue with that is services were poorly run when public. Hence privatisation looked appealing.
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They are still poorly run, but very expensive. At least under public ownership it was cheap and there was SOME accountability.

The first thing to happen when a service gets privatised is massive cutbacks and the money goes off-shore in to someone's bank account, with no new investments. Look at Royal mail, all public transport, bin collections. All worse than they used to be but also expensive.

On top of that, MPs are often involved in these corporations in some way and shield them. It would be corruption if they hadn't legalised it for themselves. It's the same with construction, it's corrupt AF which is how they get away with building **** and overpriced houses on flood plains and not telling buyers that it's probably going to be a lake a few times a decade.
 
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So I'm Wales water is not for profit. But we have maybe the most expensive bills. Assuming ours isn't expensive due to corruption, Thames has been run badly and builds have been too low for too long.
Our population is too high and unproductive to have low bills, bad regulation, clean rivers and clean water.

As others have said. It's wage growth and lack of productivity that's the real drag.

I don't think the UK can be fixed personally. Well, not realistically.
 
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b0rn2sk8 said:
Surely the starting point is for you to actually do some research before coming to a conclusion?

For example, have you read the last 30 of your local water companies annual reports which set out expenditure and major investment over the last 30 years?
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I have not. I'm not suggesting there have been no improvements. I just question whether privatisation has truly delivered the best value for money for all its customers while balancing that against its shareholder obligations. Since Thames is the example, that competition appears to have been heavily weighted towards its shareholders. I recognise the need for privatisation, at that time, but I do not think anyone can be particularly happy with where it has ended up.
 
ttaskmaster said:
The Treasury is looking again at the costs of renationalisation, this time in more detail.
Bets on it turning out to be insanely more expensive than previously thought?
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I don't doubt it. It is a complete basket case with no viable financial way to correct except to continue with the status quo and concessions and what not with the tax payer on the hook for it all.

I wish something radical would occur, emergency legislation or somesuch introduced which would effectively transfer all infrastructure to a public body minus all the debt and then let the share-holders fight it out in the courts for any scraps. No doubt, that would create a chilling effect for all current and future private investment but then again perhaps it would serve as a warning to others to run these services in a financially coherent, solvent and ethical way.

Never gonna happen.
 
So you think we should take the Corbyn approach because thats what you are proposing.

To be clear, what you are proposing is the government should steal all the assets which have a real value and pay nothing for them.

That could have catastrophic consequences let alone being illegal.
 
b0rn2sk8 said:
So you think we should take the Corbyn approach because thats what you are proposing.

To be clear, what you are proposing is the government should steal all the assets which have a real value and pay nothing for them.

That could have catastrophic consequences let alone being illegal.
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Make it so the investors must be British citizens.
 
b0rn2sk8 said:
So you think we should take the Corbyn approach because thats what you are proposing.

To be clear, what you are proposing is the government should steal all the assets which have a real value and pay nothing for them.

That could have catastrophic consequences let alone being illegal.
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Would like to see something radical occur, yes. Do I think such a thing could be legal under current legislation, no.

I do think something radical needs to happen to either make the privatised model work or something else.

I typed sometime back in the thread to modify any and all contractual obligations applied to these companies from operational matters to licensing and ownership which includes heavy and punitive penalties, which could include ownership of key infrastructure transferring to a public body at a nominal cost. These changes could occur as contracts are renewed.

When it comes to debt, investment etc, I'm still of the view the shareholders need to suck it up. A reimbursement mechanism of sorts, based on future profit / surplus from revenue, could be setup which provides a nominal return to legacy suppliers repaid over many years nay decades (perhaps which includes a cut-off after x number of years).

Does the current legal frame-work support this? No. Could the framework be changed, I don't see why not. If privatisation is to work it needs to be financially sustainable but more importantly credible and ethical as a key infrastructure service. I'm not adverse to to paying more but I am agog at allowing these increases without any further protections, limits or caps. I'm utterly bemused for instance, how Thames can continue to pay out millions in dividends and bonuses against it's own debt pile. There have been endless restructuring proposals over the years yet the situation continues to get worse. It is a bitter pill to swallow knowing that whatever increases do occur will be contributing to debt repayment versus service improvements.

What would you like to see happen?
 
b0rn2sk8 said:
So you think we should take the Corbyn approach because thats what you are proposing.

To be clear, what you are proposing is the government should steal all the assets which have a real value and pay nothing for them.

That could have catastrophic consequences let alone being illegal.
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The infrastructure itself is sunk, hasn't got any resale value on the open market.

In the water sector the infrastructure is represented by a regulatory capital value (rcv). It's just a number in the accounts really but is underpinned by the regulatory mechanism and used to set bills. RCV depreciates aligned with asset lives and grows as new capital assets are installed. Thames RCV is about £20 billion. Opex doesn't hit the RCV.

So the government could take the physical assets and operate them. Then the decision would be whether or how to reimburse the firm for it's RCV. It could leave it intact but locked at depreciate only, continue to recover the same bill and use a portion to pay down the RCV over time. Or it could pay it off in a lump sum. Either way Thames Water then has to use this to pay back it's debts. This is ok I think, effectively the firm is wound down, RCV is depreciated to zero over time and revenue used to pay back it's debt aligned to this depreciation rate.

However the government is then responsible for operating costs and new capital which are also substantial. How does the government fund many billions of new capital? It would either get this from Thames customers directly (unaffordable) or fund it via debt as Thames does now. Or spread costs over whole taxpayer base (won't go down well in other parts of country).

So probably not much would change from a customer point of view. Their bill would still pay off the existing debt over time, and meet the immediate costs of opex. The issue would be how to fund new capital.
 
danlightbulb said:
The infrastructure itself is sunk, hasn't got any resale value on the open market.

In the water sector the infrastructure is represented by a regulatory capital value (rcv). It's just a number in the accounts really but is underpinned by the regulatory mechanism and used to set bills. RCV depreciates aligned with asset lives and grows as new capital assets are installed. Thames RCV is about £20 billion. Opex doesn't hit the RCV.

So the government could take the physical assets and operate them. Then the decision would be whether or how to reimburse the firm for it's RCV. It could leave it intact but locked at depreciate only, continue to recover the same bill and use a portion to pay down the RCV over time. Or it could pay it off in a lump sum. Either way Thames Water then has to use this to pay back it's debts. This is ok I think, effectively the firm is wound down, RCV is depreciated to zero over time and revenue used to pay back it's debt aligned to this depreciation rate.

However the government is then responsible for operating costs and new capital which are also substantial. How does the government fund many billions of new capital? It would either get this from Thames customers directly (unaffordable) or fund it via debt as Thames does now. Or spread costs over whole taxpayer base (won't go down well in other parts of country).

So probably not much would change from a customer point of view. Their bill would still pay off the existing debt over time, and meet the immediate costs of opex. The issue would be how to fund new capital.
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No, the company clearly has resale value, if you can’t see that, it’s not worth having the conversation.

The government can’t just ‘take ownership’ it would fundamentally break the principles of our system of enterprise.

It has got resale value via an open market. If the company wasn’t sinking under its own debt burden, it would be worth billions.

If this company collapsed into administration, the government would have to compete with the private sector to buy the assets. The existing creditors would get whatever the purchaser pays for the assets which have a real value. The shareholders would lose their money as there is unlikely to be enough value in the company after paying back the creditors.

Don’t forget, its captive audience of customers are one of, if not its biggest asset, its worth real money.

A buyer would have to re-finance the business, be that the government or otherwise.
 
b0rn2sk8 said:
No, the company clearly has resale value, if you can’t see that, it’s not worth having the conversation.

The government can’t just ‘take ownership’ it would fundamentally break the principles of our system of enterprise.

It has got resale value via an open market. If the company wasn’t sinking under its own debt burden, it would be worth billions.

If this company collapsed into administration, the government would have to compete with the private sector to buy the assets. The existing creditors would get whatever the purchaser pays for the assets which have a real value. The shareholders would lose their money as there is unlikely to be enough value in the company after paying back the creditors.

Don’t forget, its captive audience of customers are one of, if not its biggest asset, its worth real money.

A buyer would have to re-finance the business, be that the government or otherwise.
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The value of the company is in its RCV. Its RCV is what guarantees future revenue and profit. There is only an indirect link between physical assets and the firms value (the link is set every five years at price reviews).

The Government could take away Thames license to operate tomorrow, and adopt the assets (obviously would require legislation, but could be done).

The company still has its RCV in this case. That RCV would have given the company a future guaranteed revenue stream and this is what the firms value is predominantly based on.

So the government could allow the wound up firm to keep recovering revenue against its RCV but not operate the assets nor invest in future new assets.

The RCV would slowly depreciate over time. Revenue collected against the RCV would pay back the debt (c.80% gearing I believe).

Eventually (about 20 years) the original RCV would depreciate down to nothing and the firm would have paid back its debts. It would then vanish into nothing.


This would be no change for the customer. The customer pays a percentage of the RCV now, plus opex, plus returns. The bill could stay the same, a portion of it pays down the original RCV. Opex is 1:1 anyway so collected and spent in year. The issue becomes the government then having to fund new capex which is billions.


It would be possible to do this (legislative change obviously) and the original firm doesn't lose out on its historic investments and no upfront spend from the government. What the firm loses is its future RCV growth which could be argued would have been guaranteed under its license.
 
bloodiedathame said:
I agree, shareholders should remember that their investments can pay off, or fail.

I feel sorry for the pension schemes that are tied up in Thames Water.

www.theguardian.com

Thames Water wins court backing for £3bn debt package

Deal approved at high court gives company £1.5bn in upfront cash to stave off collapse
www.theguardian.com www.theguardian.com

Cost of £1.5bn to maintain an appeal!
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You know shareholders will get wiped out in any rescue deal right?

Anyway this deal is a farce. There is no way this is sustainable.
 
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bloodiedathame said:
I agree, shareholders should remember that their investments can pay off, or fail.

I feel sorry for the pension schemes that are tied up in Thames Water.

www.theguardian.com

Thames Water wins court backing for £3bn debt package

Deal approved at high court gives company £1.5bn in upfront cash to stave off collapse
www.theguardian.com www.theguardian.com

Cost of £1.5bn to maintain an appeal!
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It is this continuation of madness that boggles me. Laying on more debt under the guise it can appeal and convince the regulator / CMA / whoever that bills need to rise to service that very same debt plus improvements. Just burning through money knowing customers and ultimately tax payers are on the hook as the sole guarantor.

It is the "holding on to the status quo at all costs" that baffles me more. An earlier poster suggested we're all too pessimistic; is it a wonder why!
 
Anglian, South East Water and Southern also appealing determinations.

The deadline is today so might be some more coming throughout the day.



Company announcements:


Southern Water Appeals Ofwat Final Determination

www.southernwater.co.uk www.southernwater.co.uk

Decision by Board requesting Ofwat to refer its PR24 Final Determination to the Competition and Markets Authority (CMA) | Anglian Water Services

Anglian Water’s Board has asked Ofwat to refer its PR24 Final Determination to the Competition and Markets Authority (CMA).
www.anglianwater.co.uk www.anglianwater.co.uk

www.thameswater.co.uk

Final Determination referral | Newsroom | Thames Water

Thames Water Utilities Limited (“TWUL”) has today asked its economic regulator, Ofwat, to refer its Final Determination to the Competition and Markets Authority
www.thameswater.co.uk www.thameswater.co.uk
 
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