Financial Times: At the end of 2022, a group of large pension plans, including funds from Canada, Japan and the UK, discovered that they had lost a large part of the £5bn investment in Thames Water that they had recorded on their books. This Easter, they learnt that they had probably lost all of it. There is only one way for a water utility serving the capital of a G7 country to lose so much value so fast: it was never worth £5bn to begin with. Yet its owners denied this reality for years. The signs that Thames Water and its parent Kemble Water Finance constituted a high-risk, low-profit business were there all along. The cost of capital in this investment should have been considered quite high (and increasing over the years) and its value much lower.
For twenty years it was generally supposed that infrastructure investment was low-risk and producing steady, reliable cash flow. An ideal investment vehicle for a pension fund that has to pay out regular benefits. Thames Water is simply not that. Nothing that relies on regulation and political situation can be ever low risk. Nobody can know what the all-powerful regulators will dream up and impose on businesses. In the public mind and for left-wing regulators, business is intrinsically dirty and businessmen are all pigs. Profits are stealing from people, so there must be no pity for them.
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