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Thames Water must resolve its financial problems, Chancellor Jeremy Hunt has said, warning that the Government will never insure investors against bad decisions.
Hunt said on Wednesday he would not tell a private company how to structure its balance sheet, adding that it would be “completely wrong” if customers of Britain’s largest water group had to pay the bill for poor decisions made by its managers or owners.
Thames Water, which provides water services to 15 million people in southern England, faces the prospect of a disorderly debt restructuring or even temporary renationalisation, amid public anger over wastewater pollution and mistrust of the privatized English water system.
Reporters asked Hunt about Thames Water during a visit to Washington for the spring meetings of the International Monetary Fund and World Bank.
He said the company needs to “fix its own problems”, adding: “What we will never do for people investing in the UK is say that the state will insure you against bad decisions made by management or shareholders. This is what markets are all about.”
Hunt declined to say whether Thames Water could go into special administration, saying the Treasury “prepares for all possible outcomes in situations like this”.
“What I want to protect in terms of national interest is more investment, to ensure a more resilient water supply, clean rivers and fair treatment for taxpayers,” he added.
Thames Water has remained mired in a long-running tug-of-war with industry regulator Ofwat, and investor resistance to the regulator’s demands resulted in the group’s parent company defaulting this month.
Thames Water has debt of £18.3 billion and its shareholders include Chinese and Abu Dhabi sovereign wealth funds and Canadian and British pension funds.
Last month shareholders signaled their willingness to take an estimated £5 billion loss on their investment as they ruled out injecting new capital into the group.
The company needs billions of pounds of new funding to maintain its operations and refurbish aging infrastructure.
Thames Water has lobbied Ofwat for permission to undertake large increases in customer bills, a relaxation of rules on dividend payments and greater leniency on any fines for service failures.
Despite the problems at Thames Water, Hunt defended the UK as a destination for foreign investment, describing the country as “one of the most attractive places on the planet in terms of infrastructure investment”.
He added that there are lessons to be learned from the travails of public sector monopolies, such as water companies.
“We need to make sure companies are regulated in a way that ensures what happens to their balance sheets doesn’t harm the public services we all depend on,” Hunt said.