UK liquidity drain as water companies rack up Â£ 50bn in debt: foreign owners spend their fortunes on loans … but fail to stop sewage from flowing into rivers
Britain’s biggest water companies have racked up colossal debts draining billions of pounds of money that could be spent to prevent sewer leaks.
An investigation by The Mail on Sunday found that nine of Britain’s biggest water companies have racked up a mountain of debt in excess of Â£ 50 billion, siphoning off vast payments in interest rates, dividends and “every year. Financial expenses”.
Six of them – Thames Water, Anglian, Northumbrian, Southern, Yorkshire and Wessex – are owned almost exclusively by foreign interests. The owners include investment funds controlled by the governments of China, Abu Dhabi, Kuwait and Singapore as well as conglomerates and investors from Hong Kong, Australia, Canada, United States, Germany and Malaysia.
Thames Water is Britain’s largest water supplier and has the largest net debt at Â£ 14.1 billion. It is owned by a group of investors including the Abu Dhabi Investment Authority, the China Investment Corporation – two of the largest sovereign wealth funds in the world – and the Ontario Municipal Employees Retirement System, one of Canada’s largest pension funds. .
A spokesperson insisted the debt was closer to Â£ 12.5bn at her preferred measure and said she spends around Â£ 1bn on improving the network each year. But its parent company, Kemble Water Holdings, also paid Â£ 384million in interest through March, among a host of other fees and expenses.
Meanwhile, Yorkshire Water, with a debt of Â£ 7.2 billion, is partly owned by the Singapore government; Southern is partly owned by the Australian Macquarie Fund; and Wessex Water is owned by Malaysian company YTL Power International. Funds controlled by Hong Kong billionaire Li Ka-shing own Northumbrian Water as well as a stake in Southern Water.
The scale of responsibility is emerging as the public increasingly fears that water giants intentionally release increasingly frequent sewage leaks into seas and rivers.
According to a report by the Angling Trust and Salmon & Trout Conservation, the lack of investment in networks over the past two decades has caused pollution so severe that there have been more than 400,000 cases of oil spills. sewage in rivers and coastal waters last year. Recent video footage has shown a water pipe spewing untreated sewage into a port in Hampshire for 49 straight hours.
Water companies will be forced to reduce the amount of sewage they pump into rivers and seas after a public backlash sparked a row in the House of Commons last month. Environment Secretary George Eustice has now confirmed that water companies will be legally required to “ensure a gradual reduction in the adverse effects of storm overflow discharges.”
Water companies and the regulator Ofwat have repeatedly defended the practice of allowing leaks into rivers and seas. This often happens when the UK sewage system is submerged in rainwater. Water companies say it’s best to let wastewater flow into waterways, otherwise it will flow back into streets and homes.
They also argue that pollution is controlled and diluted by rainwater.
Companies say they are heavily regulated and face tough limits on how much they can reinvest in their networks as part of measures to cut bills. But activists say more needs to be done to hold companies to account and prevent leaks.
In 1989, the water companies were placed in public hands as companies listed on the London Stock Exchange. But the dream of privatizing water companies has turned sour, with many now back in private hands and subjected to complex financial engineering that means billions are extracted each year in payments to investors. .
George Turner, director of the TaxWatch campaign group, said: âIn the 1980s these companies were privatized without debt to better allow water companies to invest in their networks. At the time, they had been underinvested by the government and we had become known as âthe dirty man of Europeâ.
âBut we have come full circle. Many are back in government hands. But this time it’s foreign governments, sovereign wealth funds and foreign pension funds.
He said the debt had been taken to “crazy” levels to raise funds to buy the businesses in the first place and to reinvest, adding: “Regulators have consistently underestimated the amount water companies would loan out. when they have such a stable income from clients. ‘
Julian Richer, ethical business activist and founder of Richer Sounds, said: âThis is outrageous. These sewage discharges are only supposed to occur in exceptional circumstances and have now become the norm. ‘
Ofwat has decided to fill some loopholes, such as restricting the use of tax havens by their owners. He said: “Companies that adopt a higher gear [borrowing] bear the risk themselves, but must share all the benefits with customers. We continue to monitor and challenge companies where we see gaps in their identification and management of financial risks. ‘
It wasn’t meant to be like this
It wasn’t supposed to be like that. When Margaret Thatcher privatized the UK water industry in 1989, she wanted dormant companies to be held to higher standards by turning us, their customers, into shareholders. Instead, a group of foreign investors from China to Canada have taken control, racked up debt and extracted billions of dollars in cash – all while letting sewage poison our waterways.
It is time for ministers to clean up this mess, demanding that private water companies be returned to the stock exchange where they belong.