Who will win in standoff between Thames Water’s investors and watchdog?

The news that Thames Water’s investors have pulled the plug on future investment in the ailing utility, leaving it vulnerable to future nationalisation, is the culmination of a long game of brinkmanship with the industry regulator, Ofwat. As talks behind closed doors reached their conclusions in recent weeks, tempers were fraying. One insider described the discussion as very heated. At their heart was the issue of how to save the privatised water industry’s biggest beast, which is struggling under £14bn debts, and trying to agree a plan to replace its long sweated assets, keep its investors happy and stop it being fined for polluting the environment. On one side of the standoff were officials from Ofwat, which stands accused of allowing water companies to run amok for decades, and has toughened up its act of late. On the other were the shareholders, drawn in the first place to invest in an essential public utility and a monopoly because, as one researcher put it, “it was an ATM for investors”. They include the UK’s largest pension fund, the Universities Superannuation Scheme, as well as the Ontario Municipal Employees Retirement System, the sovereign wealth fund of Abu Dhabi and the Beijing-owned China...

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