Ofwat: Water regulator courts investors with refreshed PFI deals
Ofwat is courting investors with plans to guarantee risk and minimise competition as it looks for more than £50bn to upgrade the water sector’s second-rate infrastructure.
Private investors will have the “right to collect” revenue from customers, “opportunities for upside”, “capped liabilities” and “investment positive” support from the government, according to a briefing paper seen by the Financial Times.
The proposals seek to quell investor concern over the risks of plugging cash into a sector plagued by financial issues and with a total debt pile of more than £60bn.
Ofwat has approved around 30 new projects as water companies begin the long-process of fixing an infrastructure network starved of investment in recent years.
The National Audit Office (NAO) has said it would take 700 years at the current rate to complete the essential upgrades needed to stop excessive sewage leaks and guarantee the UK’s water supply.
The schemes will be delivered via PFI-style arrangements akin to those used on London’s Thames Tideway Tunnel, in which billpayers front the cost through an additional surcharge.
Other projects include Abingdon Reservoir, a massive reservoir proposed by the UK’s biggest water supplier, Thames Water, which is grappling with a serious financial crisis.
Ofwat’s document was presented at a conference hosted in the London offices of Jefferies last Friday. Attendees included Aviva, Agilia Infrastructure Partners and Equitix, according to the FT.
“Engaging with investors and the supply chain is critical for competitive procurement, driving value for money for customers,” a spokesperson for Ofwat said.
“This type of engagement activity from key stakeholders is important to optimise the delivery of projects, and we will work with companies to scale up market engagement in coming months.”
The Tideway tunnel’s financial model has attracted plaudits for reducing the overall cost of the scheme.
But wider use of such an approach is controversial given it would require jacking up already sky-high customer bills even as water bosses and shareholders net bumper dividends and bonus payouts.
Plans by ministers to use new powers to block executives at crisis-hit Thames Water from taking hundreds of thousands in bonuses were revealed by the Guardian yesterday evening.
Chair Sir Adrian Montague and chief executive Chris Weston faced MPs earlier this week and admitted senior managers could be in line for a huge paycheck, linked to a £3bn emergency loan from creditors that staved off bankruptcy earlier this year.