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‘E is a luvverly one

In particular, there will be charges secured by the loan creditors of Thames Water over many of its assets. Its last accounts suggest that there are approximately £23 billion worth of assets in the company, financed by borrowings that exceed £15 billion,

As an accountant knows, this means that Thames is not bust. So, how to prove that it is bust?

This is not to say that the loan financiers to Thames Water would not have a claim for payment from any liquidator seeking to re-establish Thames Water as a going concern, whether under state or private ownership (and given that state money is inevitably going to be involved in this process, the first of these options seems to me to be very obviously the most desirable). Loan financiers should be paid the fair value of the assets over which they have charges subject to the fact that those assets will necessarily be used in the ongoing trade of the business, because no alternative is conceivable, and taking into consideration the fact that the business in question is, first of all, financially unsustainable its current format and, secondly, has substantial obligations to make investment to maintain the trade which must be taken into consideration when valuing existing assets which are not fit for purpose. Thirdly, the costs of the necessary transformation of the company to become net-zero compliant between now and 2050 must also be taken into account. I suggest that this valuation basis must be created by law.

Let’s lower the value of those assets by law so as to make sure that Thames is indeed bust.

Sigh.

9 thoughts on “‘E is a luvverly one”

  1. I believe there are certain New York judges capable of arriving at the correct asset valuations in order to prove that a crime has been committed.

  2. Seb Steeleman has the right idea – see his comment that sneaked through on Murphy’s blog. Obviously Murphy wasn’t going to allow any of the follow-up comments to be included!

  3. Even with debts numerically greater than assets they wouldn’t be bust as they have captive customers and a guaranteed future income stream which would put them in a better situation than almost every startup.

  4. The very fact that such a grade A moron is fully behind ‘Net Zero’ ought to be enough to convince people it’s a scam. The man is little more than a thief.

  5. People confuse Thames Water (ring fenced regulated entity) with Thames Water (plc), even our regulator.

    Ring fenced company owns the water assets (valuable essential infrastructure) and has a regulated return on equity.
    PLC owns the ring fenced company, through a ladder of companies with debt to juice the return on equity. Even the great ‘equity injection’ to a lower hold co proved to be a debt increase.

    Isn’t finance wonderful? Our auditors have asked about our exposure (lots of noughts) leading to much pointless, productivity sapping, email traffic. My firm holds debt issued by the ring fenced company. Won’t touch higher levels with a barge pole.

    Lots of investors did for a few extra bps. The difference in risk/return only gets seen at times like this. What really annoys me, and the public, is those who got paid out for extra return but lost loads.

  6. “there are approximately £23 billion worth of assets in the company, financed by borrowings that exceed £15 billion,”
    and
    “this means that Thames is not bust”

    Not really. A company is “bust” or “insolvent” when it cannot pay its debts as they fall due. This may happen when it holds illiquid assets exceeding the amount of the debt. A company also may not be bust even if its assests are exceeded by its debts as long as it has adequate income to keep servicing the debt.

    See https://www.gov.uk/government/publications/options-when-a-company-is-insolvent/options-when-a-company-is-insolvent

  7. True, but in many such cases it would be possible to raise a loan secured against the assets, and avoid bankruptcy that way.

  8. Does TW really have £23bn of ‘assets’? Or does it have a load of stuff it paid £23bn for at some point, which isn’t the same thing as something they can even sell, let alone get £23bn for. After all TW water have a pipeline through one of my farms, something that undoubtedly cost them a lot of £££ to install only a few years ago. Whats it worth now, exactly? Its not worth much in and of itself. Who needs to shift large amounts of liquids from fixed point A to fixed point B? Digging up the pipe itself would cost more than the cost of buying new pipes. Not least because only the water industry have the statutory powers to enter private land to play around with pipelines. Any other private owner would have no right to repair or remove ‘their’ asset. So the only buyers for TW’s assets would be another water company (or someone authorised by the regulator to be one), who then need to pay less than the £15bn that TW can’t service right now. So pretty much by definition the assets are worth less than the £15bn in debts, precisely because TW have proved you can’t borrow that much and service the debt.

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