WEBVTT - What's Gone Wrong at Thames Water and What Could Be Next 0:00:03.520 --> 0:00:09.320 Bloomberg Audio Studios, podcasts, radio news. 0:00:10.760 --> 0:00:12.680 If you think about the consequences that we've all been 0:00:12.720 --> 0:00:14.880 living with, it's such a unique story, isn't it. You've 0:00:14.880 --> 0:00:18.480 got on the one hand, it's about a company in distress, 0:00:18.520 --> 0:00:21.239 so far, so normal, but it's also about you know, 0:00:21.360 --> 0:00:23.799 we use its water. You've got the boat race the 0:00:23.800 --> 0:00:26.239 other day where the rowers were all some of them 0:00:26.239 --> 0:00:28.200 were real. They were told not to go in the water, 0:00:28.280 --> 0:00:32.280 which is very, very unusual. When I send my kids 0:00:32.280 --> 0:00:34.640 into the sea, I do wonder if they'll get sick. 0:00:35.000 --> 0:00:37.080 And I remember being in government and saying to someone 0:00:37.840 --> 0:00:41.199 speed now two years ago, you know, would you swim 0:00:41.840 --> 0:00:43.280 and they said, I'd be very careful. 0:00:43.920 --> 0:00:44.880 This is the thing. 0:00:44.920 --> 0:00:47.400 You've kind of got the public side of it, which 0:00:47.440 --> 0:00:51.800 is sewage and leaks and people literally having sewage spills 0:00:51.800 --> 0:00:53.519 in their kitchens and being told it's because they put 0:00:53.600 --> 0:00:55.920 nappies in the toilet and they don't even have children. 0:00:56.920 --> 0:00:58.160 And then you've got this. 0:00:59.680 --> 0:01:04.840 Very very complicated financial structures and extremely complicated regulation because 0:01:04.880 --> 0:01:07.160 these are privatized monopolies. 0:01:09.400 --> 0:01:12.000 From Bloomberg Studios in the heart of the square mile. 0:01:12.120 --> 0:01:13.039 This is in the city. 0:01:13.240 --> 0:01:17.520 Our weekly look at the conversations motivating powerbrokers, policymakers and 0:01:17.600 --> 0:01:22.040 financiers the world over. I'm alegra Stratton. Francine and Dave 0:01:22.080 --> 0:01:24.720 are both away on holiday this week. I'm not bitter, 0:01:25.360 --> 0:01:29.680 so I've instead asked my fellow associate editor and Readout 0:01:29.680 --> 0:01:33.640 author Alva Ray to make her podcast debut this morning. Alva, 0:01:33.720 --> 0:01:35.480 you were writing yesterday, what did you do in the 0:01:35.520 --> 0:01:35.959 read app? 0:01:36.400 --> 0:01:36.919 I did? 0:01:37.600 --> 0:01:40.320 Rachel Reeves in Lightintinhart. She's going to fund some of 0:01:40.360 --> 0:01:44.119 her manifesto pledges after Jeremy Hunt nicked there. 0:01:43.959 --> 0:01:45.280 In Nondo holicy. 0:01:45.480 --> 0:01:46.200 What's the answer. 0:01:47.120 --> 0:01:51.200 I Cracking down on tax dodgers is the plan. Whether 0:01:51.200 --> 0:01:54.080 that will actually work is less certain, but they're hoping 0:01:54.120 --> 0:01:57.080 that they can squeeze an extra five billion by doing that. 0:01:57.680 --> 0:01:59.720 But both of us have written about Thames Water. I 0:01:59.760 --> 0:02:02.880 think I did it last week. I can't remember all. 0:02:02.800 --> 0:02:05.680 Me sinto one your pieces too. 0:02:05.840 --> 0:02:10.600 So we're joined by Jess Shankleman, who is Pillenberg's guru 0:02:10.880 --> 0:02:13.520 on all things Thames Water. Jess, you were given the 0:02:13.560 --> 0:02:15.680 beat about six months ago when he came back from 0:02:15.680 --> 0:02:16.920 Matt leave, won't you Yes? 0:02:17.320 --> 0:02:19.480 I came back from Matt leave and was told yeah, 0:02:19.560 --> 0:02:21.400 you know you're going to be covering Thames water now. 0:02:21.440 --> 0:02:23.560 But prior to that, I was doing a lot on climate, 0:02:23.600 --> 0:02:27.080 which I still do when I have a second And 0:02:27.120 --> 0:02:28.919 it was kind of a weird moment because I came 0:02:28.919 --> 0:02:32.120 back around August September and the crisis from last year. 0:02:32.160 --> 0:02:34.880 There's Thames water crisis last year where they almost went 0:02:34.880 --> 0:02:40.520 into special administration was subsiding and I just thought it 0:02:40.639 --> 0:02:43.079 was really quiet, and Rachel Morrison, my boss, was saying, no, 0:02:43.120 --> 0:02:43.880 it's going to blow up again. 0:02:43.880 --> 0:02:44.679 It's going to blowup again. 0:02:44.760 --> 0:02:46.119 You didn't think it was a big assignment. 0:02:47.760 --> 0:02:50.560 I was kind of like, Oh, I'm writing about rest 0:02:50.880 --> 0:02:52.880 what's going on with these reservoirs in Oxfordshire? 0:02:53.000 --> 0:02:56.960 And they kept talking about debt and gearing and I 0:02:57.040 --> 0:03:00.359 was like, oh God, I don't know all this stuffed too. 0:03:01.360 --> 0:03:03.000 And then I so sort of spent the last six 0:03:03.040 --> 0:03:05.200 months going to conferences and trying to embed myself in 0:03:05.240 --> 0:03:07.680 the water industry, which is very small and. 0:03:07.760 --> 0:03:09.120 There's a lot of revolving doors. 0:03:09.120 --> 0:03:12.400 Everyone's worked everywhere and just trying to work out what 0:03:12.560 --> 0:03:14.880 is going to happen with Thames. At the end of November, 0:03:14.919 --> 0:03:18.760 my colleague Phil Oldrich wrote story saying Kemball, which is 0:03:18.760 --> 0:03:20.520 a parent company of Thames, might run out of. 0:03:20.919 --> 0:03:24.720 Run out of money, not run out of water and loan. 0:03:24.800 --> 0:03:27.400 Behold they have So that was the key moment November 0:03:27.560 --> 0:03:28.120 four months ago. 0:03:28.320 --> 0:03:29.079 Well it was there. 0:03:29.400 --> 0:03:31.760 It was the end of their annual report which came late, 0:03:32.680 --> 0:03:34.920 and the auditors warned that there was a possibility they 0:03:34.960 --> 0:03:37.200 might run out of money in April, which is where 0:03:37.240 --> 0:03:37.480 we are. 0:03:38.400 --> 0:03:40.240 So yes, give us, give us the sort of most 0:03:40.240 --> 0:03:41.560 relevant aspects of the story. 0:03:41.720 --> 0:03:43.240 Yeah, so, I mean I just to go back a 0:03:43.240 --> 0:03:44.400 couple of days. That is what happened. 0:03:44.400 --> 0:03:47.000 At the end of last week. Kemball effectively defaulted on 0:03:47.040 --> 0:03:50.240 its loans. So Kemball is the parent company of Thames Water. 0:03:50.640 --> 0:03:53.320 That doesn't mean that Thames is defaulted on its loans. 0:03:53.360 --> 0:03:59.920 Thames is still operating. We reported that Kemble's owners, that 0:04:00.440 --> 0:04:04.040 nine different shareholders of this company, which is basically an 0:04:04.040 --> 0:04:09.760 investment vehicle, begged Steve Barkley, the Environment Secretary, please step 0:04:09.800 --> 0:04:13.280 in and help with this process with the regulator. They're 0:04:13.320 --> 0:04:15.560 not giving us what we want. And he came back 0:04:15.600 --> 0:04:18.640 and said nope, this is not for me to deal with. 0:04:19.480 --> 0:04:20.360 So we. 0:04:21.600 --> 0:04:24.280 Yeah, well, the government do not want to step in 0:04:24.360 --> 0:04:26.680 and have this on their hands. It's a massive depth 0:04:26.720 --> 0:04:28.080 pole that they have to deal with, if so. 0:04:28.680 --> 0:04:31.919 And that's what our government team has really been reporting 0:04:31.920 --> 0:04:34.560 for the past few weeks that Richie Sunak just you know, 0:04:34.600 --> 0:04:37.400 wants to wash his hands off this. But until you 0:04:37.600 --> 0:04:41.440 reported that, you know, Steve Barkley formally rejected this plea 0:04:41.520 --> 0:04:43.320 for help. I suppose it was just vibes that we 0:04:43.320 --> 0:04:44.000 were reporting. 0:04:44.120 --> 0:04:48.440 Yes, so the government has updated it's special administration legislation 0:04:48.520 --> 0:04:50.400 for water companies, so they did that at the beginning 0:04:50.400 --> 0:04:54.480 of this year, and basically having done that, they hope 0:04:54.520 --> 0:04:56.520 to be able to sit back and just let this 0:04:56.640 --> 0:04:59.120 play out. If terms was brought into special administration, it 0:04:59.200 --> 0:05:02.000 kind of creates like a repackage off the shelf model 0:05:02.000 --> 0:05:03.680 that you can then break them up and sell them 0:05:03.800 --> 0:05:06.640 if you need to, whereas prior to that, it was 0:05:06.680 --> 0:05:09.040 all this kind of old nineteen nineties legislation that made 0:05:09.080 --> 0:05:10.240 everything very complicated. 0:05:10.320 --> 0:05:12.479 So they've just got their ducks in a row. 0:05:12.920 --> 0:05:14.440 But just let's just look at that for a second. 0:05:14.440 --> 0:05:16.520 You said the government sort wants to let this play out, 0:05:16.520 --> 0:05:17.840 but what does that actually mean. 0:05:18.000 --> 0:05:19.720 At the moment, we are in the middle of a 0:05:19.760 --> 0:05:21.720 crucial point in the regulation process. 0:05:21.760 --> 0:05:22.800 Off what is the regulator. 0:05:23.240 --> 0:05:25.800 Every five years, every single water company has to say, 0:05:25.800 --> 0:05:28.320 this is our five year business plan of what we're 0:05:28.320 --> 0:05:30.000 going to do, the investments we're going to make. So 0:05:30.040 --> 0:05:32.360 at the moment they are all trying to work out 0:05:32.360 --> 0:05:33.880 what they're going to do from twenty twenty five to 0:05:33.920 --> 0:05:36.000 twenty thirty. They put the business plans in at the 0:05:36.040 --> 0:05:37.720 end of last year, and off What spends a year 0:05:37.800 --> 0:05:40.320 reviewing them. So this is really crucial at the moment 0:05:40.320 --> 0:05:42.920 because they're in negotiations and that's what's been happening between 0:05:42.920 --> 0:05:47.000 Thames and off What and it's become very politicized because 0:05:47.880 --> 0:05:51.120 spalled back to COVID people started swimming in rivers, they 0:05:51.160 --> 0:05:54.599 realized that they were swimming in poo. Water companies would 0:05:54.600 --> 0:05:58.200 which is shocking. Yeah, water companies were told you have 0:05:58.240 --> 0:06:02.440 to make massive investments in stopping sewage bills and stopping leaks, 0:06:02.440 --> 0:06:04.520 and water companies were saying, but up until now we've 0:06:04.520 --> 0:06:07.039 been told that the main focus has been to keep 0:06:07.040 --> 0:06:10.760 bills low, which is still a focus, but you also 0:06:10.800 --> 0:06:12.479 have to now fix all the sewage bills and all 0:06:12.480 --> 0:06:15.080 the leaks, and Thames is appalling for sewage bills and 0:06:15.120 --> 0:06:17.600 it has the worst leaks of all the water companies. 0:06:17.760 --> 0:06:19.960 The other thing that was happening was there was concerns 0:06:20.000 --> 0:06:23.240 about dividends and off what started cracking down on dividends, 0:06:23.880 --> 0:06:28.119 and Thames's whole business model is basically built on paying 0:06:28.160 --> 0:06:31.960 dividends to its parent company, and off what has stopped that, 0:06:32.040 --> 0:06:34.320 which means that its parent company now has no source 0:06:34.360 --> 0:06:34.840 of income. 0:06:35.240 --> 0:06:36.920 So if we just go back to how this is going. 0:06:36.839 --> 0:06:40.520 To play out, all of these negotiations that have been 0:06:40.520 --> 0:06:42.480 happening between Thames and off Whats so far have been 0:06:43.080 --> 0:06:45.600 behind the scenes, and what's been announced is based on 0:06:45.760 --> 0:06:48.960 conversations that we don't really know the details of. But 0:06:49.120 --> 0:06:51.480 in June, off what has to come out with its 0:06:51.560 --> 0:06:54.120 draft determinations on all the business plans. That's going to 0:06:54.160 --> 0:06:55.880 be the next sort of big moment for Thames. They 0:06:55.920 --> 0:06:57.760 have said, we're going to go back to our parent 0:06:57.760 --> 0:07:00.479 company at this stage and ask again, please you give 0:07:00.560 --> 0:07:02.560 us the money we need. So they need about three 0:07:02.600 --> 0:07:06.640 billion out to the end of twenty thirty. But as 0:07:06.680 --> 0:07:10.080 it stands with Kemble defaulting on its loans, that's very unlikely. 0:07:10.720 --> 0:07:13.240 So then Chris West and the CEO said, well, we 0:07:13.280 --> 0:07:15.200 might go to the market, So what does that mean 0:07:15.280 --> 0:07:15.800 an IPO? 0:07:18.240 --> 0:07:18.880 Which will you. 0:07:18.920 --> 0:07:20.679 Know, A lot of people have laughed at the idea 0:07:20.720 --> 0:07:23.000 of that. Terms would probably do very badly in an IPO. 0:07:23.200 --> 0:07:27.360 But listed water companies perform much much better than all 0:07:27.360 --> 0:07:29.440 the other water companies that are run by private equity. 0:07:29.440 --> 0:07:32.640 There are so much more transparency and accountability, and you 0:07:32.720 --> 0:07:35.760 have kind of easier access to to shareholders and investors 0:07:35.760 --> 0:07:36.480 if you did it that way. 0:07:36.520 --> 0:07:37.960 So that is a possible, That's. 0:07:37.920 --> 0:07:40.720 Exactly I think that would be a good. 0:07:40.480 --> 0:07:42.440 I really don't know. I was talking to dta Helm 0:07:42.600 --> 0:07:43.400 on Friday. 0:07:43.120 --> 0:07:44.240 About an energy expert. 0:07:45.040 --> 0:07:47.000 Yeah, and he thinks he thinks it's a good idea. 0:07:47.560 --> 0:07:49.440 But other people I spoke to they just laughed in 0:07:49.480 --> 0:07:51.520 my face when I suggested it and said no, you know, 0:07:52.480 --> 0:07:54.080 like when when was the last time I was trying 0:07:54.120 --> 0:07:56.160 to think back to it. When was the last time 0:07:56.160 --> 0:07:57.880 we had a big sort of IPO, Like was it 0:07:58.000 --> 0:07:59.720 Royal Mail Company? 0:07:59.720 --> 0:08:02.920 And yeah, Alva, how does that play out? 0:08:03.080 --> 0:08:06.080 But people will always need water, which is why people 0:08:06.160 --> 0:08:08.760 have sort of pension funds invest in it in the 0:08:08.800 --> 0:08:12.200 first place. So maybe in the longer terme jest. Do 0:08:12.200 --> 0:08:14.600 you think that that that could work? 0:08:14.760 --> 0:08:17.200 Yeah, I wonder whether it could be quite bumpy to start, 0:08:17.320 --> 0:08:19.880 but as you say, that's that's the whole reason that 0:08:20.320 --> 0:08:23.360 people invested in water in the first place. And Tames 0:08:23.360 --> 0:08:25.200 Water is too big to fail at the moment, it 0:08:25.200 --> 0:08:25.720 could get. 0:08:25.560 --> 0:08:31.600 Broken up, and I think, I think it's I think it's. 0:08:31.440 --> 0:08:33.760 Possible, and times have said yeah, all options are on 0:08:33.800 --> 0:08:35.040 the table at the moment. 0:08:35.280 --> 0:08:38.120 Thames wanted to put up bills by forty percent. This 0:08:38.200 --> 0:08:41.200 is sort of where the latest crisis has come from. 0:08:41.240 --> 0:08:43.079 They had a five year plan to put up bills 0:08:43.080 --> 0:08:44.800 by forty percent to pay off some of the s debt, 0:08:45.040 --> 0:08:48.640 to invest in infrastructure. Can you take us through what 0:08:48.760 --> 0:08:53.040 has happened since and quite how dramatic things are at 0:08:53.040 --> 0:08:53.480 this point. 0:08:54.360 --> 0:08:57.000 Tames has been asking off what for leeway on a 0:08:57.000 --> 0:08:59.959 couple of things, and from my reporting speaking to people 0:09:00.280 --> 0:09:03.080 on all sides of everything, there's a couple of things 0:09:03.160 --> 0:09:06.280 that Thames want and I think it's very natural for 0:09:06.520 --> 0:09:10.600 in this like extremely complicated environment for people to focus 0:09:10.600 --> 0:09:13.000 on bills. All the water companies want to want to 0:09:13.000 --> 0:09:14.640 put up bills, and Thames is looking to put up 0:09:14.640 --> 0:09:16.840 bills by forty percent by the end of twenty thirty. 0:09:17.600 --> 0:09:21.320 I think probably what's more significant is there's something called 0:09:21.360 --> 0:09:23.840 the whack. So over the last six months I've been 0:09:23.880 --> 0:09:24.320 doing a lot. 0:09:24.200 --> 0:09:25.280 Of learning about the whack. 0:09:25.360 --> 0:09:29.000 Tell us about the wack jargon wa WA double C 0:09:29.520 --> 0:09:31.880 the weighted cost of capital, and that's kind of really 0:09:31.920 --> 0:09:35.400 crucial to all these negotiations. So that says like, this 0:09:35.440 --> 0:09:37.160 is how much it's going to cost Thames Water to 0:09:37.200 --> 0:09:40.680 dig up the road outside of Bloomberg HQ to fix 0:09:40.760 --> 0:09:44.120 that leaky pipe, and Thames is saying, look, you know, 0:09:44.160 --> 0:09:46.760 it's going to cost us one hundred pounds a day. 0:09:47.000 --> 0:09:48.280 Obviously a lot more than that. 0:09:48.640 --> 0:09:51.760 And of what is saying, well, you know, up in 0:09:52.600 --> 0:09:54.520 you know, another part of the country, it's costing seven 0:09:54.840 --> 0:09:56.760 only seventy pounds a day, so I don't see why 0:09:56.800 --> 0:09:59.840 it should cost you anymore. So Tames are saying, you know, 0:10:00.040 --> 0:10:02.360 effectively it's London waiting, right, it costs more to do 0:10:02.360 --> 0:10:05.720 stuff in London because there's skyscrapers and a lot of people. 0:10:06.200 --> 0:10:10.079 And off, what's not bending on that off, what's argument 0:10:10.240 --> 0:10:14.040 is this company has been financially engineered over the years. 0:10:14.200 --> 0:10:20.320 It's failing on sewage it's failing on leakage, why should 0:10:20.360 --> 0:10:24.040 we give this company any leeway and off what is 0:10:24.080 --> 0:10:26.880 fighting for its life as well of what needs to 0:10:26.920 --> 0:10:29.120 prove that it's cracking down. 0:10:29.240 --> 0:10:32.240 So just what are the other options? We've sort of 0:10:32.360 --> 0:10:34.640 hinted at it, But yeah, how likely is it that 0:10:34.679 --> 0:10:38.480 the government steps in? And what are the other options 0:10:38.480 --> 0:10:38.959 on the table? 0:10:38.960 --> 0:10:40.679 So yeah, So as I think we we sort of 0:10:40.679 --> 0:10:43.040 reference earlier, the government wants this to play out. So 0:10:43.280 --> 0:10:46.080 I think this government does not want to step in. 0:10:46.120 --> 0:10:48.920 I mean, we've got an election in a couple of 0:10:48.960 --> 0:10:51.960 weeks time, mayoral elections in London and obviously Terms is 0:10:52.000 --> 0:10:55.360 the supplier of London water. Then we've got a general 0:10:55.400 --> 0:10:57.400 election coming up, and they do not want to make 0:10:57.440 --> 0:11:03.120 this an election about water. Anyone who takes ownership of Thames, 0:11:03.160 --> 0:11:05.520 I mean, as far as I know, no one would 0:11:05.520 --> 0:11:09.680 buy Thames as it stands. But if say you decide 0:11:09.679 --> 0:11:11.240 to buy it for a pound, you would then have 0:11:11.280 --> 0:11:14.920 to invest three billion pounds in fixing chronic leak, sewage spills, 0:11:15.240 --> 0:11:19.079 terrible customer service, everything. So the government does not want 0:11:19.120 --> 0:11:22.880 to spend three billion pounds on sorting this out, particularly 0:11:23.080 --> 0:11:26.280 if you think about why they got into this mess. 0:11:26.559 --> 0:11:31.120 Is it really the responsibility of the taxpayer to fund 0:11:31.160 --> 0:11:34.200 that investment that should have been happening over the last 0:11:34.400 --> 0:11:35.040 decade or so? 0:11:35.280 --> 0:11:38.439 Alva, what's the Labor perspective on all of this? Clearly 0:11:39.120 --> 0:11:42.520 recesting that Prime Minister and Steve Barkley are wanting the 0:11:42.679 --> 0:11:45.320 company to sort this out, but this is a central 0:11:45.360 --> 0:11:48.280 issue for a possible next government if Labor win the 0:11:48.320 --> 0:11:48.840 next election. 0:11:49.640 --> 0:11:52.280 Yeah, I think so. I mean, especially because it looks 0:11:52.320 --> 0:11:55.480 as though the government are hoping that they will be 0:11:55.520 --> 0:11:58.000 able to wash their hands off this and ess as 0:11:58.040 --> 0:12:01.360 reported that Thames should have enough money to last until 0:12:01.679 --> 0:12:03.800 next year so they could just kick the cant on 0:12:03.800 --> 0:12:06.720 the road. Labor would have to potentially step in and 0:12:07.160 --> 0:12:11.319 bail terms out essentially, which they desperately don't want to do. 0:12:11.800 --> 0:12:14.040 I think they're not saying terribly much about it, even 0:12:14.080 --> 0:12:16.840 off the record. I think that they are probably actually 0:12:16.840 --> 0:12:18.640 more aligned with the government on this than they would 0:12:18.640 --> 0:12:20.679 like to admit. If there are potential avenues for the 0:12:20.720 --> 0:12:23.520 government to never get involved, I think Labor would favor that, 0:12:23.600 --> 0:12:24.160 which is true. 0:12:24.480 --> 0:12:26.360 I was talking to an investor who was saying, they're 0:12:26.400 --> 0:12:29.120 wondering the size of Labour's majority, because if they have 0:12:29.200 --> 0:12:32.000 a very large majority, Kirstama will be able to avoid 0:12:32.360 --> 0:12:35.600 special administration. But if they have a smaller majority, and 0:12:35.640 --> 0:12:37.960 you know, John McDonnell and some of the people on 0:12:38.000 --> 0:12:40.120 the hard left have been calling for nationalization, it would 0:12:40.120 --> 0:12:41.560 be harder for him to avoid that. 0:12:41.880 --> 0:12:45.400 Jess you reported last week that OFF what has to 0:12:45.440 --> 0:12:49.960 make a decision about whether to find terms for some 0:12:50.080 --> 0:12:55.080 of this mismanagement, and my read of that was that 0:12:55.080 --> 0:12:57.679 that could be decisive and whether the government does need 0:12:57.720 --> 0:13:01.280 to step in sooner rather than later. What's happening with 0:13:01.360 --> 0:13:01.839 that fine? 0:13:01.960 --> 0:13:02.960 Would it change things? 0:13:03.120 --> 0:13:03.320 Yeah? 0:13:03.360 --> 0:13:06.520 I think that has broader implications for the whole industry really, 0:13:06.600 --> 0:13:10.720 because the way that a lot of these businesses are 0:13:10.720 --> 0:13:15.360 structured is you've got the utility, which is regulated and 0:13:15.440 --> 0:13:21.440 ring fenced, paying dividends to the unregulated parent company to 0:13:21.600 --> 0:13:24.960 service the parent company's debt. And that is of what 0:13:25.080 --> 0:13:28.120 is not happy with OFF. What it's saying, particularly if 0:13:28.160 --> 0:13:31.680 you're a poorly performing company, you should not be paying 0:13:31.720 --> 0:13:34.439 dividends to service someone else's debt. All the money should 0:13:34.440 --> 0:13:37.960 be going to fixing sewage spills and leaks. And Thames 0:13:38.000 --> 0:13:40.520 was basically just the test case because that rule was 0:13:40.559 --> 0:13:42.880 introduced around this time last year in Thames was the 0:13:42.880 --> 0:13:44.960 first one to announce that it had paid the dividends. 0:13:45.080 --> 0:13:48.160 My question is whether this could have a domino effect 0:13:48.640 --> 0:13:51.480 and when other companies start getting blocked from paying these 0:13:51.520 --> 0:13:56.120 dividends as well, their parent companies would also say that 0:13:56.200 --> 0:13:58.679 this structure is no longer sustainable. 0:13:59.400 --> 0:14:02.280 Unless we're for all these big infrastructure upgrades that you 0:14:02.320 --> 0:14:05.880 can see across lots of different policy areas, private money 0:14:05.880 --> 0:14:08.480 will be needed. And is there a concern that the 0:14:08.559 --> 0:14:11.000 regulator may have gone too far the other way? And 0:14:11.040 --> 0:14:14.240 for private money around the world looking at the UK 0:14:14.360 --> 0:14:16.560 and thinking do I invest in its utilities? 0:14:16.960 --> 0:14:18.400 Is that going to become too risky? 0:14:18.559 --> 0:14:18.719 Yeah? 0:14:18.720 --> 0:14:19.520 I mean I understand. 0:14:19.600 --> 0:14:22.680 I've just been told from conversations with investors that the 0:14:22.680 --> 0:14:25.880 Treasury is quite worried about the signal this sends to 0:14:26.160 --> 0:14:28.680 investors globally. And I think the question is is Tames 0:14:28.760 --> 0:14:31.200 a bad apple. Is it just a very very badly 0:14:31.280 --> 0:14:36.000 run utility, or is this the UK saying we've got 0:14:36.080 --> 0:14:39.000 very complicated and difficult regulation and you shouldn't come here. 0:14:39.600 --> 0:14:42.600 I think it's probably the former. I think Thames has 0:14:42.680 --> 0:14:43.120 just been. 0:14:43.000 --> 0:14:45.920 A right old mess and off what is in a 0:14:46.080 --> 0:14:49.960 very very difficult situation politically. The investors have been very 0:14:50.000 --> 0:14:52.680 critical off what but if you push them they kind 0:14:52.720 --> 0:14:55.480 of admit that, like what else can they do? I 0:14:55.520 --> 0:14:59.040 think the noise around it makes this sector completely uninvestable 0:14:59.120 --> 0:15:01.520 at the moment, and that is something that really has 0:15:01.560 --> 0:15:05.400 to be tackled because there's so much negativity in the 0:15:05.400 --> 0:15:09.240 media and around the politics of it that no one 0:15:09.520 --> 0:15:11.040 in their right mind just want to go near it. 0:15:11.960 --> 0:15:16.200 So we haven't formally heard from off what it makes 0:15:16.240 --> 0:15:20.720 of Thames's planned but we've had reporting that it doesn't 0:15:20.720 --> 0:15:25.440 support the current plans, and then shareholders have said that 0:15:25.600 --> 0:15:28.080 Thames is uninvestable they refuse to put the money in, 0:15:28.480 --> 0:15:33.760 and then last week the parent company defaulted on its debt. 0:15:34.760 --> 0:15:40.240 So it seems like this crisis has ratcheted up quite 0:15:40.240 --> 0:15:42.160 a few notches, yes, and. 0:15:43.040 --> 0:15:44.800 Quite dramatically in the last two weeks. 0:15:44.880 --> 0:15:48.720 Yeah, So what happens in the immediate term? What should 0:15:48.720 --> 0:15:49.800 we look for next? 0:15:49.840 --> 0:15:52.760 Who's going to blink? I think is it a question? 0:15:53.000 --> 0:15:55.360 Is this a game of brinkmanship? And I think that's 0:15:55.400 --> 0:15:57.200 what a lot of people think. A lot of the 0:15:57.240 --> 0:16:02.240 newspapers are reporting that the parent company has said, like, 0:16:02.280 --> 0:16:05.320 we're not even waiting for off What's an official determination. 0:16:05.560 --> 0:16:08.040 We've had enough conversations with off What to know that 0:16:08.080 --> 0:16:10.360 this is not going to work. This plan is uninvestable, 0:16:10.920 --> 0:16:13.280 and therefore you deal with it. 0:16:13.320 --> 0:16:17.040 We're done, so you know. 0:16:17.160 --> 0:16:20.240 One option could be that one of the larger shareholders, 0:16:20.320 --> 0:16:24.880 say Omer's, which is the Canadian or USS, says Okay, 0:16:25.080 --> 0:16:27.760 we've put all this money into Thames already, we still 0:16:27.800 --> 0:16:30.360 haven't got a penny out. Why don't we just gamble again. 0:16:30.720 --> 0:16:33.600 We'll put the three billion in and we'll wipe out 0:16:33.600 --> 0:16:37.080 all the other investors and we'll take this on and 0:16:37.120 --> 0:16:40.320 eventually Thames will get turned around and we will make money. 0:16:42.080 --> 0:16:44.440 I don't know if that is going to happen, because 0:16:44.760 --> 0:16:52.080 having had conversations with people around this, it seems quite terminal, 0:16:52.200 --> 0:16:54.720 and the fact that Kemball has defaulted on its loans 0:16:55.280 --> 0:16:57.800 suggests that they really have thrown in the towel. 0:16:58.360 --> 0:17:01.080 Jess, thank you so much for coming in and explaining 0:17:01.120 --> 0:17:04.639 all of this to us. Is markey business, No worries anytime. 0:17:05.320 --> 0:17:06.760 I fear you'll be back quite soon. 0:17:06.840 --> 0:17:08.560 Oh no, it's true. For the next year. 0:17:08.680 --> 0:17:11.920 This is gonna This is a very slowly imploding company. 0:17:12.000 --> 0:17:12.600 I think it's. 0:17:15.760 --> 0:17:18.040 Thanks for listening to this week's In the City from Bloomberg. 0:17:18.119 --> 0:17:21.320 This episode was hosted by me alegra Stratton with Alva Ray, 0:17:21.600 --> 0:17:24.760 and it was produced by Somersadi additional editing by Blake 0:17:24.800 --> 0:17:29.159 Maple's Brendan Newnham is our executive producer. Sage Bauman is 0:17:29.200 --> 0:17:32.080 Head of Podcasts and special thanks to Jess Shankleman. 0:17:32.520 --> 0:17:36.560 Please subscribe, rate, and review wherever you listen to your podcasts.