Thames Water: Water rip-off!

Thursday-Friday blog

Most readers will probably be aware of the shenanigans around Thames Water.

Drowning in debt

The current situation is that Thames Water has massive, unrepayable debts. Thames Water’s ballooning debt—reaching approximately £18.5 billion—is currently at the center of a tense battle involving major hedge funds and distressed-credit investors. As the utility struggles to stave off financial collapse, the government has had to intervene to protect consumers from bearing the brunt of these rescue deals.

The vultures look for easy pickings

What seems to have happened is:

• when the water companies were first privatised, their debt levels were around 5% to 10%.
• the owners of the water companies, including Thames Water, loaded the companies with massive debts. This increased debt levels to around 80%. The owners used the loans to pay themselves eye-watering dividends
• much of that debt has now been bought by ‘vulture funds’ (hedge funds) at hugely-discounted rates and now those vulture funds stand to make vast profits by blackmailing the UK government into either allowing the water companies like Thames Water to massively increase prices to consumers to help pay off the interest on those debts or to nationalise the companies thus handing over billions in profits to the vulture funds who bought the ‘distressed debts’ at rock-bottom prices.

I warned you

It’s never satisfying to say “I told you so”. Actually, that’s a lie. It is rather satisfying to say “I told you so”. Here’s a small part from my book GREED UNLIMITED written in 2012 about how the water companies, and in particular Thames Water, were fleecing us:

Thames Water provides an excellent example of how the supine, impotent, self-serving Ofwat is allowing water companies to fleece us. In 2000, the company was bought by the German RWE for £6.8 billion. Over the six years of its ownership, RWE pocketed around £1 billion in dividends. It then sold Thames to an Australian company for £8 billion. So RWE made around £2.2 billion – about £30 million a month or £1 million a day -from its brief ownership of Thames. Yet during its ownership RWE was allowed to increase water bills well above inflation by claiming it needed the money to invest in reducing leakage. In addition to its exploitative high prices, for years Thames has further increased its profits by selling off land and facilities to people like property developers. When asked why it had closed twenty five bulk water storage facilities, Thames explained, ‘all these sites were shut down when they became surplus to operational requirements following upgrades to our network’. At the same time as Thames was saying this, it had imposed a hosepipe ban due to a lack of water.

At the moment we don’t know what will happen with Thames Water – either a nationalisation costing us taxpayers billions or massive increases in water bills costing Thames Water customers billions. The only certainty seems to be that the vulture funds will make billions at our expense.