Macquarie ‘very proud’ of Thames Water ownership despite loading it with debt

The investment bank that sold Thames Water in 2017 after loading the company with debt has said that it is “very proud” of its record, even as the water utility teeters on the verge of collapse.

Australia-headquartered Macquarie led a consortium that owned Thames Water from 2006 until 2017. Macquarie has been criticised by some politicians and analysts for its control of the business, accusing the bank of setting it on course for financial collapse.

Thames Water supplies water and sewerage services to 16 million customers in London and south-east England. However, it has reached the edge of collapse after debts rose to near £20bn, and it last month won court approval for £3bn in emergency funding.

Macquarie’s critics argue that the investment bank set Thames Water on the course to ruin. Debt at the utility rose from £3.4bn when Macquarie bought in to £10.8bn when it sold its last stake in 2017. At the same time, Macquarie and other investors received dividends worth £2.8bn.

Ben Way, the group head of Macquarie Asset Management, last month told investors on a call that Thames Water had improved under its ownership.

“We’re actually proud, very proud of our ownership of Thames Water,” Way said. “It was a much better business, imperfect, but much better business after our stewardship, and we can’t talk about what happened subsequently.”

Way, who has worked for Macquarie since 2006, denied any link between Thames Water’s more recent financial struggles and the bank’s ownership, according to a transcript hosted by the data company AlphaSense. The Financial Times first reported on the comments.

“So imagine being blamed for a house that you own seven years ago when the roof leaked,” he said. “It is quite strange.”

Despite the £3bn debt package, Thames Water still has to secure longer-term equity investment in order to fund upgrades to sewer and water treatment works after decades of underinvestment. Thames has chosen KKR, a US private equity investor, as its “preferred partner”. The New York-based company is expected to acquire a stake in Thames worth £4bn.

Macquarie is now the biggest shareholder in Southern Water, another utility under financial pressure. Way said Macquarie had not faced a backlash from the government over its record on Thames.

“What I would say is that Thames Water is a very good example of the ability to have the courage of your convictions and look beyond the media drama or noise,” Way said. “Because the fact of the matter is, no regulator in the UK in the last 10 years has looked at Macquarie other than as a very positive owner of assets.”