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This is not, in fact, true

Thames Water’s biggest investor has slashed the value of its stake in the company to zero in a move that renders the troubled supplier effectively worthless, The Telegraph can disclose.

The Canadian pension fund Omers said it has been forced into a “full write down” of its investment in Thames, a day after withdrawing its representative from the utility company’s board.

The write-down represents a complete loss for Omers, which valued its 31.7pc stake in Thames’ parent Kemble at £700m at the end of 2022.

That is saying that Kemble, the holding company, might be worthless. It is not saying that Thames Water, the ring fenced, regulated, water provider is worth nothing. There’s some amount of debt at the Kemble level which may well be greater than the ability of the dividends from TW to support – thus the worthlessness. Which could even mean that Kemble can be bought for very little, possibly even that those owning that debt take a haircut.

But for all those slavering to nationalise, that doesn’t mean that Thames Water is going to be cheap. Because if yuo do takeover Kemble you can indeed do that cheap – maybe – and impose a hbaircut on the Kemble debt. But the TW debt would still be at full value if you did and thus paying that back would be a cost of the takeover. Further, the TW value belongs, in law, to the Kemble shareholders and creditors.

It’sa a lot more complex – and expensive – than Spud and the like make out.

3 thoughts on “This is not, in fact, true”

  1. Well, that’s true in one sense. But if we’re talking about the government taking things, that’s merely nationalisation and definitely, absolutely, in no sense theft.

    So politicians assure me. So it must be true, right?

  2. My firm holds a tasty slice of the OpCo debt. The Board gets told about hierarchy of creditors and so on. Then someone pipes up about political risk. And we all agree there is pretty much nothing we can do about it apart from stopping investing in the U.K.

    The U.K. risk premium is going up.

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