Why Thames Water is Headed for Special Administration
Thames Water supplies about 16 million customers in the Thames Valley and London, and it is deep in financial trouble. Its debt has swollen to somewhere between a staggering £18 - 20 billion.
And these staggering debts now mean that it's pretty much impossible for the company to attract any new investors. I mean, you just wouldn't, would you?!?
To avert collapse, the government has moved to invoke a Special Administration Regime (SAR). This is in effect short-term nationalisation with the objective of keeping key services (water & sewers) whilst restructuring takes place. SAR would also see nationalisation of a large part of the firm's debt mountain.
Private sector bailouts (one led by private equity firm KKR among them) have failed, largely due to regulatory and financial issues. Most companies which have shown an interest in taking on Thames Water want a more relaxed regulatory environment, naturally, as this would mean they have more freedom to do what they need to with the company.
However regulators and government bodies like Ofwat and DEFRA have been reluctant to relax environmental obligations, though they have been willing to forgo some flexibility, most notably fines. For example Thames Water agreed with Ofwat to defer most of a £123 million penalty to allow nearly £100 million to be paid post-2030, giving the utility much-needed respite.
The risks of relaxing regulation
Opposition sources warn against giving too much latitude for fear of setting bad precedents, especially for environmental performance and for public confidence.
It also sends a message out to any other private companies to go ahead and strip out profit from our public services: if you get to the point of damaging them where things can't be repaired, we'll just bail you out and let you off any fines your'e due.
Final thoughts...
This is a depressing tale of failed privatisation... I think the only lesson we can learn here is to not let this happen again, although it's maybe too late for that, there's probably plenty more public services which are going to fail due to extraction over the next few decades...
Sighs...
It is important that any changes focus on sustainable practices instead of just quick fixes.
Whether privately run or government run, the costs seem to be nationalized. The main difference is that when government runs things poorly, they can simply squeeze money from taxpayers to cover it up. Privatized, they don't have the accounting tricks government has at their disposal, making the losses more transparent. The public is paying for it either way.
Most companies can simply go bankrupt. But a utility is not the type of business that can do that as people rely on them for basic living. There are water companies here in Texas that are also mismanaged, resulting in them going into receivership to turn things around.
We come under Thames water and have on a number of occasions suffered water shortages but interestingly weren’t imposed with a hosepipe ban this year. They are a shambles.
I was fully expecting one, but you're right, perhaps they just don't care anymore!