Thames Water serves around 16 million customers in southeast England, and is currently grappling with financial losses and public outrage.Toby Melville/Reuters
Britain’s troubled utility Thames Water is facing so much financial turmoil that its ownership structure, which includes two Canadian pension funds, was compared to a Monty Python sketch during a parliamentary hearing on Tuesday.
Thames Water is the country’s largest water operator, and it serves around 16 million customers in southeast England. It is buckling under a £16.8-billion ($30.8-billion) debt, as well as increasing levels of public outrage over sewage spills. Management has been trying for months to restructure the company and avoid being taken over by the government.
On Tuesday, Thames reported a pretax loss of £1.65-billion ($3-billion) for the year ended March 31, compared with a profit of £157-million ($288.3-million) a year earlier. The company blamed higher-than-normal rainfall last year for overwhelming some of its systems and causing a 34-per-cent increase in sewage leaks to 470 cases.
Chris Weston, the chief executive officer, said in a statement that “it will take at least a decade to turn Thames around.”
Mr. Weston and other Thames executives appeared before the House of Commons Environment, Food and Rural Affairs Committee on Tuesday, and they were grilled about the company’s ownership.
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The Ontario Municipal Employees Retirement System (OMERS) has been the utility’s largest single shareholder for several years, through a stake in Thames’s parent company Kemble Water Finance Ltd. OMERS owns around 32 per cent of Kemble through several subsidiaries, but the pension fund wrote off the holding last year, which was once worth around $1-billion. OMERS also withdrew its representative from the Thames board.
The British Columbia Investment Management Corp. has owned roughly 9 per cent of Thames. Last year, Thames Water’s nine shareholders jointly chose not to inject any more money into the company after they failed to come to terms with British regulators over an operational plan for the business.
Thames has been searching in vain for new ownership and financing. Last month, the U.S. private equity firm KKR dropped a £4-billion ($7.3-billion) rescue deal citing unspecified political and regulatory risks. Thames is now hoping to work out a recapitalization agreement with a group of roughly 100 creditors. If that arrangement also falls through, the government will likely take over the utility through a process known as special administration, or SAR.
Britain’s Water Services Regulation Authority, or Ofwat, requires utilities to have an “ultimate controller” who takes responsibility for the company’s obligations and licence conditions.
“Who is the ultimate controller of Thames Water today?” committee chair Alistair Carmichael, a Liberal Democrat MP, asked Sir Adrian Montague, Thames Water chairman, during Tuesday’s hearing.
“The ultimate controller, bizarrely, is still the original shareholders,” Sir Adrian replied. “They are not taking any active part, but they still own the shares in Kemble.”
Mr. Carmichael shot back, “You have no ultimate controller.” Sir Adrian insisted that the company had an ultimate controller “but they’re not very active.”
“They don’t exist any more,” Mr. Carmichael responded. “I can do the whole Monty Python dead parrot sketch for you, if you want, but that is a controller that has ceased to be,” he added referring to the British comedy group’s skit involving a man who unknowingly buys a dead parrot from a pet shop.
Sir Adrian finally conceded the chair’s comment and added: “We have no day-to-day contact. We have intermittent contact with them.”
A spokesperson for OMERS declined to comment.
Throughout the hearing, Sir Adrian and Mr. Weston spoke about the many problems surrounding Thames. “I joined this company two years ago in the wake of the resignation of its chairman and chief executive,” Sir Adrian told the committee. “We were in a crisis and have been in crisis mode ever since. What we are here to do now is to help it avoid a special administration.”
Mr. Weston said one way to ease some of the financial pressure would be for Ofwat to drop the financial penalties it has levied on Thames for failing to meet operational targets. He said the penalties leave the company with less money to spend on operations, which leads to more missed targets. Last year, Thames paid Ofwat £88.2-million ($162-million) in penalties, up from £56.9-million ($104.5-million) in 2024.
“We are trying to find a pragmatic solution, If we don’t find a solution then there is a good chance that we go into SAR,” Mr. Weston said.
He and Sir Adrian also faced questions about an £18.5-million ($34-million) retention program for 21 senior executives, which will pay them up to three times their annual salary. The program began in April, but it has been put on hold amid a public outcry.
Mr. Weston said the bonuses were needed to keep top managers. But several MPs on the committee criticized the company for rewarding executives while ignoring front-line staff. “I think you fundamentally misunderstand the level of frustration that the public have toward Thames Water,” said Jenny Riddell-Carpenter, a Labour MP.