Creditors of Thames Water have offered a 25% discount on written-off debt in exchange for ownership and lenient targets. Lower limits on sewage spills and water leaks are demands that the creditors are seeking from Ofwat, the UK’s water regulator.
If approved, a £3.15 billion equity and £2.25 billion debt creation will be supplied to support Thames Water’s recovery. The government supports a market-led solution, but it leaves questions about whether creditors are truly acting in the public interest.
The free market can offer unique opportunities and efficiencies for businesses, which reason why governments prevent entering the private sector. Ageing infrastructure has been the focal point of the UK, a consistent factor affecting Thames Water heavily.
Poor infrastructure means lower productivity. Workers have to operate around a historic water structure which hasn’t been modernised. Specialist equipment may be required to work around, leading to higher costs and lower output. More workers may be required to meet targets, which increases labour costs. This translates into higher customers’ bills, an aspect that households saw this year. Overall, this is a factor that creditors are arguing about.
However, the recent transaction by creditors shows the underlying profits being made in this deal. Hedge funds, such as Apollo Global Management, are planning to float Thames Water in 2030, if ownership gets transferred. It is clear that when ownership becomes privatised, the company turns to maximising profits; therefore, households may face higher prices and poorer water quality.
Households are already repaying interest for Thames Water creditors, which is set highly at 9.75%. It is imperative for the government to now consider renationalisation before it is too late. Renationalising Thames Water protects public interests and prevents the misuse, before it is too late.
Econ Oddities 
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