The biggest investor in Thames Water has cut the value of its stake in the debt-laden utility company, which has faced questions over its financial stability and ability to raise crucial funds.
The Ontario Municipal Employees’ Retirement System (Omers), a Canadian pension fund that owns a 31% stake in Britain’s biggest water supplier, reduced the valuation put on its investment last year, it has emerged.
A Singapore-registered entity owned by Omers, one of several vehicles used to invest in Thames, cut the value of its stake in the water firm’s parent, Kemble, by nearly £300m last year. That represents a near-30% writedown on the asset, the Financial Times reported.
Omers Farmoor Singapore PTE valued its holdings in Kemble at £700m last year, down from £979m at the end of 2021.
The finances of Thames Water, which has 15 million customers, have been in the spotlight after it emerged last month that officials were drawing up contingency plans in case the firm needed to be temporarily renationalised.
The Thames Water chief executive, Sarah Bentley, had abruptly resigned hours before.
Thames was scrambling to secure £1bn of financing from existing investors agreed last year, on top of £500m received in March. Alongside Omers, Thames’s investors include the Universities Superannuation Scheme, the China Investment Corporation and Abu Dhabi’s Infinity Investments.
Last week, the company said it had secured £750m to run to March 2025, but indicated it would need a further £2.5bn to cover April 2025 to March under its eighth asset management plan (AMP8) as it attempts to patch up its leaky network and cut its £14bn debt pile.
Thames’s travails have drawn further scrutiny on the financing of a debt-laden water industry already in the crosshairs over sewage dumping, leaks, bumper corporate pay, large dividends and infrastructure struggling to cope with extreme weather.
In a note to investors on Tuesday, analysts at RBC Europe said: “It is unsurprising that a stake in Thames Water would have been written down given challenges faced by the business prior to recent events.
“The uncertainty around Thames’s ability to raise the required additional £2.5bn of capital for AMP8 persists and is likely to remain an overhang on the space alongside potential uncertainty for other companies in the space that are highly levered.”
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Frédéric Blanc-Brude, the director of EdhecInfra, a research centre and data provider, told the FT he expected Thames’s other investors to be forced to make similar writedowns to Omers.
However, USS said it was not expecting “events surrounding Thames Water to have a material impact on the funding position or contribution rates coming out of the 2023 valuation, nor on the security of members’ promised pensions”.
On Monday, South East Water reported a pre-tax loss of nearly £75m, which it blamed in part on the cost of dealing with last year’s extreme weather events including the record-breaking heatwave.
Thames Water has been contacted for comment. Omers declined to comment.
