Labour to blame for Thames Water’s crippling debt pile, claims Ofwat
New Labor is responsible for Thames Water’s crippling mountain of debt, regulator Ofwat claims
The water regulator has maintained it was powerless to prevent Thames Water from piling up mountains of debt as a result of a ‘hands-off’ approach under New Labour.
David Black, chief executive of Ofwat, told members of the House of Lords Committee on Industry and Regulators yesterday that the watchdog should have intervened in 2006 to prevent the water company’s then owner, Australian investment group Macquarie, from making too much to borrow.
But he said it was crippled by a lack of powers.
Borrowing spree: Water regulator Ofwat has insisted it was powerless to prevent Thames Water from piling up mountains of debt over a ‘hands-off’ approach under Labor
“If I go back to 2006, I think we should have intervened then to stop companies [racking up debt],’ Black told colleagues. “At the time, we really didn’t have the power to prevent that.
“I think at that time, if we go back to the early 2000s, regulators across industries took a relatively hands-off approach. [borrowing].
“It’s happening in the energy sector, it’s happening in the transportation sector, so we’re very clear that we think companies need a prudent funding structure and some of these outdated funding structures need to be updated.”
But Black added that he thought “some reports about the Thames are exaggerated.”
The company “does have the ability to weather the current challenges.” Last week, CEO Sarah Bentley resigned, fearing that the company would go bankrupt because of the mountain of debt.
Black was asked by colleagues if he thought Ofwat had ‘done everything’ to prevent Thames Water from getting into financial trouble.
He said the regulator had been concerned about Thames’ debt burden since October last year, noting that the company’s financial resilience was “not sufficient”.
Asked if the water industry as a whole was in danger of collapse, Black said Thames had fallen victim to rising interest rates and its own very poor performance on environmental issues, but added that he “didn’t see the same problem” in other water sectors. companies that successfully raised money.
He said Ofwat had encountered resistance from investors in water companies when he tried to lower borrowing levels.
Black also said talks are underway between Ofwat, Thames Water and its investors about raising the £1 billion the company needs to turn the business around.