Over 70% of the English water industry is owned by foreigners, it has been revealed. According to research by the Guardian, foreign investment firms, private equity, pension funds, and companies registered in tax havens own more than 70% of the water industry in England.
As the public and some politicians call for the industry to be held accountable for sewage dumping, leaks, and water shortages, the intricate web of ownership is exposed. As pressure mounts on the industry to invest more money in repairing and replacing deteriorating infrastructure to safeguard the environment and the general public’s health, six water companies are being investigated for possible illegal activities.
The control of the water industry has shifted more than three decades after the sector was sold off with the promise that the general public would become individual small shareholders or “H2Owners,” and is now dominated by foreign investment vehicles, the ultra-wealthy, businesses in tax havens, and pension fund investors. According to Dr. Kate Bayliss, a research associate in the department of economics at the Soas University of London, the ownership structure is such that transparency and accountability are constrained.
Numerous well-known international investment funds and sovereign wealth funds are among those with sizable stakes. According to an analysis of shareholdings as of October of this year, the US investment firm BlackRock and its subsidiaries held almost 10% of the equity in Severn Trent, while the Qatar Investment Authority, with a 4.6% stake, is the third largest shareholder in Severn Trent.
According to the analysis, 8.7% of Thames Water is owned by China, and 9.9% is owned by an affiliate of the Abu Dhabi Investment Authority.
More than 100 shareholders of England’s nine major water and sewerage companies as well as six smaller businesses have been tracked by The Guardian. According to the research, companies in 17 different countries control at least 72% of the market, with 10% owned by UK companies. In total, 82% of the water sector’s ownership was identified.
In England, most water companies are now privately owned. Only three companies—Severn Trent, South West Water’s parent company Pennon Group, and United Utilities—have stock exchange listings. However, the same infrastructure funds and private equity firms that own water companies privately hold a large portion of their shares.
The ownership structures in the industry have been the subject of academic study by Bayliss, who concluded: “This is a quite different model from how one might expect a private company to operate. The owner is not just trying to increase sales, cut costs, and keep the profits. Private equity earnings are more likely to be attained through financial engineering or business financial restructuring than through increased productivity.
Southern Water is displaying early signs of operational improvements following the investment made by Macquarie, according to Martin Bradley, head of Macquarie Asset Management’s real assets team for Europe, the Middle East, and Africa. He added, “We are focused on accelerating this momentum and supporting Southern Water as it fulfills our commitments and invests the equivalent of £1,000 per household in its region during this regulatory period to upgrade its infrastructure.
A BlackRock spokesperson stated that the company engaged with publicly traded UK water companies on governance and significant sustainability risks as a minority investor on behalf of its clients. However, it is not the responsibility of minority investors to run these companies; rather, it is the management teams’, along with the appropriate board,
Severn Trent claimed to have spent £25 billion on infrastructure, including £100 million annually on enhancing the rivers in its area. The company stated that it thought dividend payments were crucial and that a sizable portion of its shareholders were retail investors, including more than 70% of its staff and pension funds, who relied on dividends on an annual basis.
According to United Utilities, it has a proven track record of responsibly raising debt at low rates to finance long-term investments in water and wastewater systems, as well as to improve customer service, safeguard the environment, and guarantee affordable bills.
According to South West Water, it’s £9 billion investment in the water and wastewater infrastructure of the area has improved performance for both the environment and its customers. According to Anglian Water, it has spent about £20 billion since privatization on projects to reduce leaks, enhance the quality of drinking water, and protect the environment. The business claimed that the net dividends paid by Anglian Water since 2010 were significantly lower than what the regulator had anticipated. According to Wessex Water, dividend payments included both the permitted, regulated return and any outperformance bonuses.
The business claimed that YTL had been a reliable owner for more than 20 years and was dedicated to the long-term stewardship of a significant asset for the public good. Northumbrian Water declined to respond.