Thames Water’s biggest investor slashed the size of its stake, renewing concerns over the financial stability of the utilities giant as it scrambles to raise equity from shareholders.
The Ontario Municipal Employees Retirement System (OMERS), one of Canada’s largest public sector pension funds, slashed the value of its stake in Britain’s largest water supplier by almost £300m last year, according to The Financial Times.
The pension giant owns a 31 per cent stake in Thames Water via parent company Kemble Water.
This held through multiple investment vehicles including a Singapore-registered entity, Omers Farmoor Singapore PTE, which owns about a fifth of the company.
The entity valued its stake in Kemble Water at £979m at the end of 2021, before reportedly reducing the value to about £700m last year – a near 30 per cent write-down.
Such a hefty reduction raises questions about how easy it will be for the indebted UK utility to persuade shareholders to inject much needed equity.
Other investors in Thames Water include the Universities Superannuation Scheme, a UK pension plan for the academic staff of UK universities, Infinity Investments, a subsidiary of the Abu Dhabi Investment Authority, and the Chinese Investment Corporation, a state-backed sovereign wealth fund.
Last week, Thames Water announced it had secured £750m from shareholders to support the business until April 2025.
However this comes with strings attached from its backers including regulatory reforms, shorthand for higher bills for its 15m customers.
To help ease its finances, Thames Water has proposed a 24 per cent increase in customer bills — or an average rise of £101 a year — for the next regulatory period, which runs from 2025 to 2030.
Ofwat will decide whether it can raise bills this much at the end of next year, in line with the price review.
Interim co-chief executive Cathryn Ross confirmed to a panel of Westminster MPs last week that households will be on the hook for the company’s improvements to its operational performance and infrastructure.
Thames Water has also warned it needs a further £2.5bn from investors by the end of the decade to be “financially resilient” and to cut debt and reduce leaks.
From 2025, regulator Ofwat will have powers to prevent water companies from paying dividends if their credit rating falls below a certain level, or if they fail to meet financial strength tests or performance measures on the environment or services.
OMERS and Thames Water have been approached for comment.