Thames Water is the UK’s largest water and sewage company. It covers - as you would expect - the Thames basin, from Gloucestershire to London. Originally private, it became state owned in 1904. It returned to the private sector 85 years later, when the Conservatives privatised the water industry.
12 years later it was taken over by the German utility firm RWE, who were criticised for failing to get to grips with leaks. Having owned the company for 5 years, they sold it to Australia’s Macquarie Asset Management for about £8bn - around £13bn in today’s money. Macquarie in turn owned it for 11 years before selling it. The two largest shareholders are now the Ontario state employee pension scheme (32%) and the UK University Pension Scheme (20%). Stakes of around 10% are held by Abu Dhabi and Chinese sovereign wealth funds, as well as the British Columbia state employee pension scheme and the BT pension scheme.
Thames Water is now in trouble. It issued a lot of debt in the Macquarie era, much of it linked to RPI inflation. The rise in inflation made that debt much more expensive, and of course Liz Truss caused a general rise in interest rates that made it harder to refinance debt advantageously.
Thames Water have asked the regulator to reduce the fines for sewage leakages, and to raise the bills that consumers pay. Under those conditions, the owners say that they will invest more money.
What should the regulator do?