Former Thames Water owner Macquarie among lenders to utility’s parent company

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Macquarie, the former owner of Thames Water criticised for loading the utility with debt, is a lender to its stricken parent company.

Macquarie’s investors lent about £130mn to the utility’s holding company Kemble Water Finance Ltd in 2018 and 2020, according to a person familiar with the situation. The loans are managed by one of the Australian asset manager’s private credit funds and amount to roughly 9 per cent of Kemble’s debt instruments, the person said.

Details of Macquarie’s continuing involvement in Thames Water, which were first reported in the Times, have emerged after Kemble defaulted on a £400mn bond on Friday. That marked the start of a potentially messy restructuring at the owner of Britain’s largest water company, which serves 25mn people.

The company’s shareholders, including pension and sovereign-wealth funds, have refused to inject more cash. Kemble’s other lenders include two Chinese state-owned banks, the Financial Times reported last week.

Shareholders have asked the regulator Ofwat for a 56 per cent increase in bills and leniency on fines. A draft decision is expected from Ofwat in June but the shareholders believe it is unlikely to agree to their demands.

News of Macquarie’s involvement sparked political condemnation.

“Under Macquarie’s ownership, Thames Water pumped millions of litres of disgusting sewage into British rivers while racking up billions of pounds worth of debt, that was then paid out to shareholders,” said Sarah Olney, Liberal Democrat MP for Richmond Park. “Water giants have failed in their responsibilities to the public while lining their own pockets. Now they are asking for bill payers to take the hit for their failings.”

Macquarie is the biggest private sector owner of infrastructure assets in the UK, with stakes in everything from wind farms to airports and gas networks. It currently owns Southern Water as well as about £120mn of debt in Anglian Water.

Its ownership of Thames Water has been widely criticised after the utility’s debt increased from £3.4bn in 2006, when it bought into the business, to £10.8bn when it sold its final stake in 2017, according to FT research.

About £2.7bn was taken out in dividends and £2.2bn in loans during that period, although Macquarie has said it spent £11bn from customer bills on infrastructure.

Thames Water has more than £18bn of debt including £15.6bn of net debt at the operating company level.

Macquarie Asset Management said: “We manage debt investments on behalf of long-term institutional investors in a range of infrastructure companies, providing long-term financing for essential infrastructure. Macquarie has not had any control or influence over Thames Water’s operating company since 2017.”

Thames Water declined to comment.

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