Who owns Thames Water? How did the water firm get in so much debt and its shareholders explained - as it warns it will run out of money

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As Thames Water warns it will run out of money by next June we take a look at who owns the water company - and how it ended up riddled in debt.

In its annual report, Thames Water has warned that it will run out of money by next June. Its debt has now swelled to over £15bn and it has also paid two fresh dividends worth £158.3 million in March. Alongside this, the water company admitted that the firm’s “performance in pollutions and sewage discharges is not where it should be or where we want it to be”, adding that “the number of reportable pollutions increased during the year to 350 from 331.”

The annual report included the fact that Thames Water is being investigated by Ofwat and the Environment Agency (EA) into sewage discharge compliance. The water firm also admitted to missing its target on leakages.

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Its ongoing failures while riddled with debt and still paying shareholders millions has garnered much criticism and anger from its customers. But how did the company end up in so much debt and who currently owns it?

As Thames Water warns it will run out of money by next June we take a look at who owns the water company - and how it ended up riddled in debt. (Photo: Getty Images)As Thames Water warns it will run out of money by next June we take a look at who owns the water company - and how it ended up riddled in debt. (Photo: Getty Images)
As Thames Water warns it will run out of money by next June we take a look at who owns the water company - and how it ended up riddled in debt. (Photo: Getty Images) | Getty Images

Who owns Thames Water?

Thames Water is part of a group of companies, known as the Kemble Water Group, and is owned by a consortium of institutional shareholders – mostly pension funds and sovereign wealth funds. Thames Water is owned by a group of investors spanning four continents.

The largest is the Canadian pension fund, OMERS, with 31.8%. The second-largest is the Universities Superannuation Scheme, with 19.7%, a pension fund for UK academics. Other investors include sovereign wealth funds from China and Abu Dhabi, which invest those nations' assets on behalf of their governments. Three other pension funds and two investment firms make up the rest.

Why is Thames Water in so much debt?

When the water company was privatised in 1989, it had no debt, but over the years it has borrowed heavily. When it was taken over in 2007 by a consortium led by Macquarie, an Australian investment bank, debts increased over the next ten years from £3.2 billion to £10.7 billion.

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The proportion of assets funded by borrowing increased to over 80%, while the company paid out dividends of £2.5 billion. Macquarie said that it invested billions of pounds in upgrading Thames Water’s and sewage infrastructure while it owned the company. But critics argue that it took billions of pounds out of the company in loans and dividends - which is a share of a business's profits that is paid to shareholders.

Thames Water has paid over £200m in dividends to other companies within the group in the past five years. Most of this money has then been paid as interest to outside investors who have loaned the group money. Critics argue that the dividends were paid with money that could have been spent on improving Thames Water's infrastructure and services.

Also, interest payments on more than half of Thames' debt rise with inflation, which has been high in recent years, and has added to the firm's woes. More than half of Thames’ debt is index-linked, according to Standard & Poor’s, the rating agency, saddling it with higher repayments as inflation has soared over the past 18 months. At the same time, the costs of energy, labour and chemicals have risen.

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