We Own It calls proposal a ‘cosy stitch-up’
The London & Valley Water (L&VW) creditor consortium on Monday proposed new board appointments at Thames Water as part of a £10bn rescue deal designed to head off the temporary nationalisation being explored by Andy Burnham.
L&VW proposed appointing former Yorkshire Water chief executive Liz Barber and former Openreach chief executive Clive Selley as directors of the utility if the consortium is permitted to take formal control of the company. Dame Bernadette Kelly, the former permanent secretary of the Department for Transport, is also lined up as a director. Current Openreach chair Mike McTighe, who is already leading Thames Water’s restructuring, would become the new chair, replacing incumbent Sir Adrian Montague.
“The challenge at Thames Water is huge. If this recapitalisation plan is accepted, we will apply full dedication as a new board, working alongside the executive team to transform the business and build a culture in which the customers and local communities who depend on Thames Water come first,” McTighe said.
The appointments are designed to reassure the government that any commercial deal would come with a leadership overhaul, as Burnham’s team examines whether to place the company into a Special Administration Regime (SAR), a form of temporary nationalisation. SAR would transfer the costs of running Thames Water to the taxpayer, with creditors claiming the bill could come to £2bn.
The announcement was criticised by We Own It, a public ownership campaign group. Cat Hobbs, the group’s director, said: “This is absolutely absurd. A cosy stitch-up that has nothing to do with the interests of the 16 million people who depend on Thames Water. This amounts to nothing more than a reshuffling of chairs on the deck of the Titanic.”
Burnham has said there should be “greater public control” of Thames Water and previously told the Guardian this could mean nationalisation. Separately, the prime minister has said he was “angry” after water companies including Thames were given the green light to raise bills further earlier this month. He said the companies must not be allowed to treat bill payers like a “blank cheque,” escalating warnings to utilities that the government is examining options for more state control of the sector.
L&VW, the consortium pursuing the rescue, comprises 100 institutional investors and includes fund managers Apollo Global Management, Elliott Management, Farallon Capital Management and Silver Point Capital. The group holds £17bn of the utility’s £21bn debt.
The consortium has moved to strengthen its legal position in case Thames Water is nationalised, hiring litigation and disputes firm Pallas Partners to work alongside Akin Gump, the law firm advising on the restructuring terms.
The lenders have been seeking ownership of the company since a failed attempt to sell it to the US investment group KKR last year. Their plans were thrown into further doubt in June when Emma Reynolds, the then environment secretary, wrote to Ofwat, the water regulator, voicing concerns about the terms of the deal.
McTighe said the 10-year plan to turn the water company around would “fix the foundations” at Thames Water. “It will take time to fix Thames Water, but we are committed to rebuilding trust with the customers and public Thames Water serves,” he said.
Russ Mould, investment director at AJ Bell, said of the proposed appointments: “The hope being that these are the sort of credible names which can inspire confidence in the company’s future in private hands.” “Such an outcome would impose large losses on creditors, who are seeking to formally take ownership of the business, having already assumed de facto control, with plans to list it on the stock market as early as 2030,” Mould said.