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Macquarie has told investors it is “very proud” of its record as the owner of Thames Water, the debt-laden utility that has fallen into deep financial difficulty since the Australian infrastructure investor sold its stake seven years ago.
Macquarie, now the majority owner of Southern Water, has drawn the ire of politicians and campaigners for its decade-long ownership of Thames Water in which debt increased dramatically and dividends were regularly paid out to shareholders.
“We’re actually proud, very proud of our ownership of Thames Water,” said Ben Way, group head of Macquarie Asset Management, an investor day last month.
He added that over the past decade “no regulator in the UK” has looked at the Australian financial group as anything other than “a very positive owner of assets”.
Thames Water’s debt increased from £3.4bn in 2006, when Macquarie first bought into the business, to £10.8bn when it sold its final stake in 2017. Now teetering on the brink of insolvency, the utility ’s debt pile has since ballooned to nearly £20bn and it is set to borrow up to £3bn more in high-interest emergency loans from its senior lenders.
“Imagine being blamed for a house that you own seven years ago when the roof leaked,” Way said.
During Macquarie’s ownership, about £2.7bn was taken out in dividends and a further £2.2bn in loans.
However, Macquarie has previously defended its record, pointing to £11bn in customer bills that was spent on infrastructure during its ownership — a figure it claimed was “the highest per customer investment level of all water companies in England and Wales”.
It has also said Thames Water’s water leakage fell 22 per cent over the period and it reduced “pollution incidents” by 75 per cent compared to 2006.
“It was a much better business, imperfect, but much better business after our stewardship,” Way said. “Thames Water is a very good example of the ability to have the courage of your convictions and look beyond the media drama or noise.”
Macquarie said: “Under our ownership we supported Thames Water as it delivered record levels of investment, which enabled significant improvements in water quality, reduced leakage and pollution incidents . . . When we sold our final stake in 2017 the company was meeting all conditions set by the regulator, and had an investment grade credit rating.”
Several of Thames Water’s largest shareholders, including pension fund Ontario Municipal Employees Retirement System and Abu Dhabi’s sovereign wealth fund, wrote off the value of their investments in the utility last year.
Thames Water has selected KKR — a shareholder in Northumbrian Water — as its preferred bidder in a process aimed at recapitalising the group, after the US private equity group submitted a preliminary £4bn bid to take a majority stake in Thames Water.
Sarah Olney, Liberal Democrat MP for Richmond Park, last year said: “Under Macquarie’s ownership, Thames Water pumped millions of litres of disgusting sewage into British rivers while racking up billions of pounds worth of debt that was then paid out to shareholders.”
Macquarie acquired the majority of Southern Water, the UK’s next most distressed water company, in 2021. The company is struggling under its own £6bn debt pile and is in talks with lenders to its holding company over potential writedowns to their loans.
Alongside the proposed haircut, Macquarie Asset Management is injecting £900mn of fresh equity into Southern Water.
