The University Superannuation Scheme (USS) has slashed its stake in Thames Water by almost two-thirds, weeks after the utilities company admitted that it does not have enough money to make debt repayments.
USS first invested in Thames Water in 2017 and holds a stake worth just under 20% in Thames Water’s parent company Kemble Water, through its subsidiary Church Water Investment.
According to the accounts report published on 30 December, the “fair value” of its investment fell to £364.4m last year, down from £956m in 2022, bringing the Thames Water valuation from £5bn in 2022 to £1.9bn in 2023.
As a result, Church Water Investment reported a loss of £591m in 2023. However, according to the investment vehicle’s report, USS will “continue to hold its investment for the foreseeable future”.
The Church Water Investment accounts report shows the value of part of USS’s investment in Thames Water which is held by Church Water itself and therefore USS’s circa £100m of an additional commitment made by shareholders to Thames Water in March 2023 is not reflected in these accounts.
In December, Thames Water admitted to UK members of parliament (MPs) at an environment, food and rural affairs committee that it does not currently have enough cash to cover its debt repayments. It faces repayment deadlines for £1.4bn debt in the coming years, including £190m in April.
Earlier in July, Thames Water told MPs that the company’s shareholders had provided £500m of equity.
This is the second-biggest write down for Thames Water’s valuation after Ontario Municipal Employees Retirement System, which holds a 31% stake in Thames Water, cut the value of its stake by nearly £300m or 30%.
A spokesperson for USS said: “The challenges facing Thames Water are the manifestation of historic under-investment over multiple decades and, more recently, the significant financial impact of soaring energy prices and other inflationary cost pressures.
“However, we have given our backing to Thames Water’s latest business plan.”
USS said that as a long-term investor, it can provide patient capital and be an active, responsible steward of the company.
The spokesperson added: “While the value we place on our Thames [Water] investment may go up or down as part of our regular revaluations, we continue to view this as a long-term investment, in line with the long-term needs of the scheme.”
The spokesperson disclosed that USS has not received a shareholder dividend or payments of interest on any shareholder loans since it first invested in 2017, with shareholders instead reinvesting capital back into the business to drive improvements.
“We remain of the view that, with an appropriate regulatory environment, the long-term objective of repairing important UK infrastructure and paying pensions to our members are in strong alignment,” the spokesperson added.
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