THAMES WATER

[Newchodge]

What would you do differently?

I have never claimed to know ther answer to the problems currently facing the water industry. Neither have you and you claim to be an expert.

What I do know is that the privatisation model is not working. Has never produced the necessary investment that was claimed would result from prvatisation and was the justification for privatisation. So change is needed.

 

[japancool]

They made a profit they were entitled to a dividend.

They could have taken it....but there would have been no money left to pay for the capital investments.

so they funded both the investments and dividend by debt.

If they didn't, there wouldn't have been any money for investments everyone asked for.

Or, as I said - the government could have funded the investment as a loan. Then at the very least, the debt would have been half of what it is, probably at a lower interest rate as well.

 

[Newchodge]

Or, as I said - the government could have funded the investment as a loan. Then at the very least, the debt would have been half of what it is, probably at a lower interest rate as well.

Surely, if the water companies needed investment in order to continue to run their business, a decision to pay huge dividends by going into debt was not in the interests of the company and the directors have failed in their duty?

 

[japancool]

Surely, if the water companies needed investment in order to continue to run their business, a decision to pay huge dividends by going into debt was not in the interests of the company and the directors have failed in their duty?

It would seem that way. They might argue that if they didn't pay the dividends, they wouldn't be able to get investment - hence why there is a role for the government here, as long as any subsequent benefit from such a loan wouldn't go to private shareholders.

 

[Newchodge]

It would seem that way. They might argue that if they didn't pay the dividends, they wouldn't be able to get investment - hence why there is a role for the government here, as long as any subsequent benefit from such a loan wouldn't go to private shareholders.

But they only get 'investment' from 'investors' if they ask them for additional money. Shares moving between shareholders geenrates no income for the company.

A cheap loan from the government MUST benefit the shareholders as it permits the company to continue functioning and pay dividends to the shareholders. Which is why these are not real private companies - the shareholders get the benefits when there is profit but face no losses because the government bails them out. Same as the railways and the banks.

 

[japancool]

because the government bails them out

Or rather - we, the taxpayers, bail them out!

 

[Newchodge]

Or rather - we, the taxpayers, bail them out!

Well, no. When the government bailed out the banks in 2008 they printed additional money to do so. The government can always produce money for things it wants to do

 

[japancool]

Well, no. When the government bailed out the banks in 2008 they printed additional money to do so. The government can always produce money for things it wants to do

The Byre would have had words about that.

 

[Newchodge]

The Byre would have had words about that.

He did!

 

[IanSuth]

The UK water companies ought to be funded by UK based investment with any dividends in whatever form going back into the UK. Currently a large number are heavily owned by foreign investors - that means the UK bill payers are exporting wealth to the foreign owners. Last i saw the UK water firms were <10% owned by UK investors (including all the UK pension fund investment)

This is exactly what the North sea oil revenues should have been funding via a sovereign wealth fund. Currently the Norwegian Oil revenue fund is worth c£250,000 per citizen. Imagine if a fund of that value existed here and was used to fund national infrastructure projects etc rather than it being funded by overseas investors.

So i suggest massive UK.gov funded renewable energy projects funded by any and all fuel taxes and the income from those energy sales to be used to fund uk infrastructure projects going fwd - it would keep that wealth flowing around the UK which "should" be deflationary as well

 

[Scubadog]

I have never claimed to know ther answer to the problems currently facing the water industry. Neither have you and you claim to be an expert.

What I do know is that the privatisation model is not working. Has never produced the necessary investment that was claimed would result from prvatisation and was the justification for privatisation. So change is needed.

Any proof it has not raised the level of investment?
Only with a >95% compliance with consented parameters across the board, i would say its hard to argue that sufficient investment has not been made.

If the fund is funded by taxes....what other services loose out on those taxes?

 

[Scubadog]

Or rather - we, the taxpayers, bail them out!

The UK water companies ought to be funded by UK based investment with any dividends in whatever form going back into the UK. Currently a large number are heavily owned by foreign investors - that means the UK bill payers are exporting wealth to the foreign owners. Last i saw the UK water firms were <10% owned by UK investors (including all the UK pension fund investment)

This is exactly what the North sea oil revenues should have been funding via a sovereign wealth fund. Currently the Norwegian Oil revenue fund is worth c£250,000 per citizen. Imagine if a fund of that value existed here and was used to fund national infrastructure projects etc rather than it being funded by overseas investors.

So i suggest massive UK.gov funded renewable energy projects funded by any and all fuel taxes and the income from those energy sales to be used to fund uk infrastructure projects going fwd - it would keep that wealth flowing around the UK which "should" be deflationary as well

They were...and then investors sold them.

 

[Scubadog]

But they only get 'investment' from 'investors' if they ask them for additional money. Shares moving between shareholders geenrates no income for the company.

A cheap loan from the government MUST benefit the shareholders as it permits the company to continue functioning and pay dividends to the shareholders. Which is why these are not real private companies - the shareholders get the benefits when there is profit but face no losses because the government bails them out. Same as the railways and the banks.

Name one time that a government has bailed out a water company....is it none?

Again, maybe you could explain why Welsh water and Scottish water are performing so bad given they have the structure you are arguing for? Welsh water being in the lowest three, with the most polluted river in the UK and the top three most polluted beaches in the UK is hardly a poster boy for your argument.

 

[Newchodge]

Any proof it has not raised the level of investment?
Only with a >95% compliance with consented parameters across the board, i would say its hard to argue that sufficient investment has not been made.

If the fund is funded by taxes....what other services loose out on those taxes?

Government expenditure id not funded by taxes.

 

[Scubadog]

Surely, if the water companies needed investment in order to continue to run their business, a decision to pay huge dividends by going into debt was not in the interests of the company and the directors have failed in their duty?

Well that is not your problem. It doesn't impact you in any way at all. The regulator still imposes on them the level of investment and where it needs to be spent, as well as the amount of dividends they can take regardless of the state of their current account.

 

[Scubadog]

Government expenditure id not funded by taxes.

Ermmmm are you sure?
Where else can they raise capital if not taxation?

 

[Newchodge]

Ermmmm are you sure?
Where else can they raise capital if not taxation?

It is created by the Bank of England

 

[Scubadog]

All of this....and one one can answer the simple questions:

What would you do to resolve this that doesnt require homeowners ripping up their driveways? Answer...there is no solution.

Given you all want public run bodies, why are the two that are public performing so badly?

 

[Scubadog]

It is created by the Bank of England

Ahhh....so you would print money and literally throw it down the drain? The leftie money tree no doubt.
You do realise the impact of pollution in rivers is less than half caused by sewerage discharges?
You do realise that the current proposals to spend £150bn will solve less than 10% of storm overflows?

And you would just print this money off and waste it, causing further inflation?

Im guessing neither sewage, water, accountancy, asset management or investments are your strong point...

 

[Scubadog]

@ Newchodge

Come on the unanswered questions to your argument are mounting now.

• Name one time that a government has bailed out a water company....is it none?
• What would you do to resolve this that doesn't require homeowners ripping up their driveways? Honestly, you clearly believe this is as simple as spending money...lets hear your idea.
• Explain why Welsh Water is performing so badly despite being run as a not for profit with no shareholders to pay dividends.
• Explain why Scottish water have decided not to monitor or report their storm overflows and levels of pollution despite being government owned and operating the same infrastructure as the rest of the UK

For some reason you keep dodging the question....is it because they unpick your argument so spectacularly? Sounds to me like you don't have any answers and just have a political ideaology rather than any real solutions.

 

[Newchodge]

@ Newchoge

Come on the unanswered questions to your argument are mounting now.

• Name one time that a government has bailed out a water company....is it none?
• What would you do to resolve this that doesn't require homeowners ripping up their driveways? Honestly, you clearly believe this is as simple as spending money...lets hear your idea.
• Explain why Welsh Water is performing so badly despite being run as a not for profit with no shareholders to pay dividends.
• Explain why Scottish water have decided not to monitor or report their storm overflows and levels of pollution despite being government owned and operating the same infrastructure as the rest of the UK

For some reason you keep dodging the question....is it because they unpick your argument so spectacularly? Sounds to me like you don't have any answers and just have a political ideaology rather than any real solutions.

No. It is because I have answered the points that matter to me.

 

[Scubadog]

No. It is because I have answered the points that matter to me.

So yea....just a political ideology then rather than any reasoned fact based argument.
Just as i thought.

 

[Scubadog]

No. It is because I have answered the points that matter to me.

Weird though...
To make an argument that doesn't stand up to scrutiny from anyone with real knowledge of the issues and then just state "none of the issues raised matter to me"

But to conclude:

You would raise capital by printing money, throw it a solution which wont resolve the issues.

Nice one.

is that your normal operation mode?

 

[UKSBD]

Given you all want public run bodies, why are the two that are public performing so badly?

Because they are obliged to provide a service whether it econimical to do so or not.

Profit making companies can move in, cherry pick the services they provide, which make the public run bodies lose even more..

Without having a public run body that has no option but to provide loss making services, these loss making services may not exist.

 

[Scubadog]

Because they are obliged to provide a service whether it econimical to do so or not.

Profit making companies can move in, cherry pick the services they provide, which make the public run bodies lose even more..

Without having a public run body that has no option but to provide loss making services, these loss making services may not exist.

Ermmmm no

All of wales and all of Scotland is publically owned and operated. No cherry picking took place...and neither make a loss...and welsh water is not obliged, it is a not for profit organisation.
How do you not know that and yet still make this argument?

 

[japancool]

Again, maybe you could explain why Welsh water and Scottish water are performing so bad given they have the structure you are arguing for? Welsh water being in the lowest three, with the most polluted river in the UK and the top three most polluted beaches in the UK is hardly a poster boy for your argument.

What is the debt situation of Welsh and Scottish Water?

 

[Scubadog]

What is the debt situation of Welsh and Scottish Water?

Key points: Welsh Water

Inflation-linked Debt Offset Inflation Benefit: Dwr has about 80% of its total debt inflation-linked (IL), higher than the Fitch-rated UK water sector average of about 60%.

Comfortable Gearing Headroom: We forecast net debt/RCV for the class A and B notes at 52.5%. This is much lower than many water companies which gear at around 70-80%

Totex Under-performance Expected: We expect Welsh Water to underperform its total expenditure (totex) allowance by 12.9% across AMP7 with operating expenditure (opex) and capex underperformance of 12.2% and 13.8% respectively.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

- A marked deterioration in operating and regulatory performance or adverse changes to the regulatory framework

- For class A and B debt: forecast gearing approaching 65%, cash PMICR below 1.5x and nominal PMICR below 1.7x

- For class C debt: forecast gearing approaching 74%, cash PMICR below 1.2x and nominal below 1.5x

- Insufficient forecast gearing headroom to compensate for weak cash and nominal PMICRs






So, less debt to RCV, but higher exposure to inflation linked burden, a huge underinvestment of Capex a failing performance, poor cash flows, a marked forecast of increasing gearing 9due to Il linked debt), marked deterioration of operation and regulatory performance are the key takeaways.....Sound good to you?


But this all assumes you prioritise financial performance over environmental? Welsh water are in the lowest three.

"Of the four environmental commitments set by Ofwat for the AMP7 period, all were missed by Welsh Water."

Latest Welsh Water Report Glosses Over Poor Environmental Performance - Afonydd Cymru

Water company misses all its 2022/23 environmental commitments....

afonyddcymru.org

If you are happy with those figures, and how the company performs financially, then what you are saying is, in relation to Thames water, you would have been happy with a £9bn debt (just the capex part) rather £14bn and accepted the same level of investment and perceived underperformance?

Some pretty mixed messaging there dont you think?


The same reporting is not available for Scottish water...neither financial or pollution.

 

[Scubadog]

What is the debt situation of Welsh and Scottish Water?

Here allow me to help make this as easy as possible for you...

Natural Resources Wales / NRW calls for step change in water company performance following annual review

NRW calls for step change in water company performance following annual review

naturalresources.wales

https://www.itv.com/news/wales/2023-07-12/water-company-downgraded-for-causing-91-pollution-incidents-in-2022

Welsh Water named among water firms 'falling short' on leaks and pollution

WELSH Water has been named as one of the six worst performing water firms, with regulator Ofwat saying the industry is “falling short” in “too…

www.southwalesargus.co.uk

https://committees.parliament.uk/committee/162/welsh-affairs-committee/news/194109/water-companies-and-regulators-questioned-on-water-quality-in-wales/

Are you really sure using the template of one of the worst performing water companies in the UK is something you really wish to use everywhere else?

They now need to raise investment to cover their index linked debts (exposure far greater than all other water companies) as well as CAPEX investment in order to improve their awful environmental performance and drag their sorry backsides from the lowest of all companies in the UK, in an attempt to clean up the 2/3rd of their rivers that are polluted, including the most polluted river in the Uk and the top 3 most polluted beaches in the UK.

they cant raise money from investors, and so can only borrow using index linked debts against RCV. remind me...how is interest rates at the moment? They only need to raise a few £10's of billions...im sure it will be fine.

 

[japancool]

Are you really sure using the template of one of the worst performing water companies in the UK is something you really wish to use everywhere else?

You read a lot into that one-sentence question a lot of stuff that wasn't there.

And Scottish Water?

 

[IanSuth]

All of this....and one one can answer the simple questions:

What would you do to resolve this that doesnt require homeowners ripping up their driveways? Answer...there is no solution.

Given you all want public run bodies, why are the two that are public performing so badly?

I gave a going forward solution.

Use any hydrocarbon based taxes (so fuel excise duty+vat on fuel and any Oil co windfall taxes) to use as seed money for building large Sustainable energy projects - so for example building wind turbines all over the dogger bank.

Use the income derived from those projects to provide the investment for infrastructure projects like sewerage upgrades PLUS make all new developments fully fund any sewerage improvements required to cope with their waste. Initially all water companies to provide per ward breakdowns of what they think is max possible increase in households that current systems can support. That to then be made available for developers to see at search stage - they could then factor in profitability or not of building a new estate when they can see what extra costs to cover it's sewerage is needed.

That would both reduce the debt requirements of the water companies and provide them a non foreign source of investment for some of their remaining debt needs (I am well aware it will not in any short term provide more than a few % but it will grow over time)

 

[Scubadog]

You read a lot into that one-sentence question a lot of stuff that wasn't there.

And Scottish Water?

Read the above....same data "conveniently" not reported by Scottish water

 

[Scubadog]

I gave a going forward solution.

Use any hydrocarbon based taxes (so fuel excise duty+vat on fuel and any Oil co windfall taxes) to use as seed money for building large Sustainable energy projects - so for example building wind turbines all over the dogger bank.

Use the income derived from those projects to provide the investment for infrastructure projects like sewerage upgrades PLUS make all new developments fully fund any sewerage improvements required to cope with their waste. Initially all water companies to provide per ward breakdowns of what they think is max possible increase in households that current systems can support. That to then be made available for developers to see at search stage - they could then factor in profitability or not of building a new estate when they can see what extra costs to cover it's sewerage is needed.

That would both reduce the debt requirements of the water companies and provide them a non foreign source of investment for some of their remaining debt needs (I am well aware it will not in any short term provide more than a few % but it will grow over time)

Actually a couple of the right ideas there....

Definatly developers should be made to pay, and perhaps even more easily, the should be forced to install separate sewage and storm systems as well as nature based solutions like SuDs. Furthermore rain harvesting and use of grey water should be included as standard in new housing. This will imeadiately reduce rain water run off and save huge amounts of water.....in one simple stroke!

Sadly, i disagree with the rest. I honestly cant make it any more simple......money will not solve the problem. Simply building treatment plants doesnt work (literally impossible to treat rain water with biological processes). Simply laying extra pipes is of little use beyond increasing hydraulic capacity.

Increasing hydraulic capacity is pointless unless you can treat it. You cant treat rain water that has been mixed with sewage.

 

[BobzYourUncle]

So we build large scale cesspit/septic tanks recycle the crap to human fertilisers (maybe) and gas emitted from the sludge to somehow power cars. Is that a solution. Sounds okay. But somehow I don't think that is feasible

 

[IanSuth]

Actually a couple of the right ideas there....

Definatly developers should be made to pay, and perhaps even more easily, the should be forced to install separate sewage and storm systems as well as nature based solutions like SuDs. Furthermore rain harvesting and use of grey water should be included as standard in new housing. This will imeadiately reduce rain water run off and save huge amounts of water.....in one simple stroke!

Sadly, i disagree with the rest. I honestly cant make it any more simple......money will not solve the problem. Simply building treatment plants doesnt work (literally impossible to treat rain water with biological processes). Simply laying extra pipes is of little use beyond increasing hydraulic capacity.

Increasing hydraulic capacity is pointless unless you can treat it. You cant treat rain water that has been mixed with sewage.

I totally agree re the grey water and etc, i think the first step is to have a solid dependable audit of where we are at that developers can see and make it legally binding that a development can not go ahead if it will push a local network past capacity without the developer funding a solution and building it BEFORE the houses are sold.

My other parts wasn't a "throw money at it", it was a "for the foreseeable the water companies will need to borrow money for investment, so let's make their borrowing work for the good of this countries economy and not against " (as foreign investment means the dividends/returns are an outflow from our economy). The "green fund" part was to pre empt the "where would the govt get that kind of money from" question. Also i am realistic enough to know that would take a decade min before you had the money from the energy sources to even start to have it available to invest in infrastructure

 

[Scubadog]

So we build large scale cesspit/septic tanks recycle the crap to human fertilisers (maybe) and gas emitted from the sludge to somehow power cars. Is that a solution. Sounds okay. But somehow I don't think that is feasible

Almost!
In fact it is already done. All water companies operate Anerobic digesters. They all create methe which is then turned into electricity. Some actaully put the methane back into the gas grid directly.

the trouble is, digesters only really work on large scale, so small ones are a no go.
The sludge (the biomass that treats the sewage) is the stuff that is actually digested. Very little solids exist in sewage (<0.5%). Again, rain water contains no food for biomass, so cannot be treated in a digester.

 

[IanSuth]

So we build large scale cesspit/septic tanks recycle the crap to human fertilisers (maybe) and gas emitted from the sludge to somehow power cars. Is that a solution. Sounds okay. But somehow I don't think that is feasible

Def not that easy, you have to treat human waste before you are allowed to spread on farmland to ensure it is not a health risk - that uses energy and costs money changing the economics of the process - our old neighbouring farm used to take it from the local treatment works (until the neighbouring fancy estate complained about the smell) - good wild tomatoe crop though.

 

[Scubadog]

I totally agree re the grey water and etc, i think the first step is to have a solid dependable audit of where we are at that developers can see and make it legally binding that a development can not go ahead if it will push a local network past capacity without the developer funding a solution and building it BEFORE the houses are sold.

My other parts wasn't a "throw money at it", it was a "for the foreseeable the water companies will need to borrow money for investment, so let's make their borrowing work for the good of this countries economy and not against " (as foreign investment means the dividends/returns are an outflow from our economy). The "green fund" part was to pre empt the "where would the govt get that kind of money from" question. Also i am realistic enough to know that would take a decade min before you had the money from the energy sources to even start to have it available to invest in infrastructure

Sorry, what i mean by it; that money will not solve the current situation.

<50% of the pollution is caused by sewage.
It is honestly costed at £600bn to solve the combined storm overflow problems everyone is so angry about. That is a completely unachievable and wastefull amount to target <50% of the actual problem.

 

[Scubadog]

Def not that easy, you have to treat human waste before you are allowed to spread on farmland to ensure it is not a health risk - that uses energy and costs money changing the economics of the process

Correct.
In fact (as testament to how the industry has evolved) the rules changed around 10 years ago. And so every water company invested in their processes. Now the sludge gets digested to make it inert, and then dosed with lime to kill pathogens. Prior to that and before privatisation, it was allowed to just be dumped either on farmland or worse, at sea.

This was never the case previously, but like all things in the industry, expectations and rules changed, and so the companies invested to keep pace with the new regulations. Contrary to the misconception that "they have done nothing"

 

[IanSuth]

Almost!
In fact it is already done. All water companies operate Anerobic digesters. They all create methe which is then turned into electricity. Some actaully put the methane back into the gas grid directly.

the trouble is, digesters only really work on large scale, so small ones are a no go.
The sludge (the biomass that treats the sewage) is the stuff that is actually digested. Very little solids exist in sewage (<0.5%). Again, rain water contains no food for biomass, so cannot be treated in a digester.

Reading got a shiny new system in 2005 - but part of it's original design (and extra cost) was dictated by the massive courage brewery's waste water flow - which promptly shut.

£80m to replace a victorian treatment works that hadnt been updated since the 60's - so not sure why now costs billions and billions

Reading Sewage Treatment Works, Reading - Water Technology

www.water-technology.net

he pasteurised sludge is subsequently pumped to four bottom-fed, egg-shaped, anaerobic digesters, each some 20m high. These are the first of their kind in the country, constructed entirely from reinforced concrete with external silver cladding. The heat required for the pasteurisation and digestion processes is provided either by digester biogas through CHP engines or three dual fuel (biogas / diesel) boilers.

The final digestate is dewatered by centrifuge and transferred to one of three sludge cake silos for storage, while the thickener and dewaterer liquors are returned to the effluent stream for treatment. This liquor return is important since the sustainability of biological phosphorus removal is partly dependent on the mass of phosphorus returned in this way.

 

[Scubadog]

Reading got a shiny new system in 2005 - but part of it's original design (and extra cost) was dictated by the massive courage brewery's waste water flow - which promptly shut.

£80m to replace a victorian treatment works that hadnt been updated since the 60's - so not sure why now costs billions and billions

Reading Sewage Treatment Works, Reading - Water Technology

www.water-technology.net

he pasteurised sludge is subsequently pumped to four bottom-fed, egg-shaped, anaerobic digesters, each some 20m high. These are the first of their kind in the country, constructed entirely from reinforced concrete with external silver cladding. The heat required for the pasteurisation and digestion processes is provided either by digester biogas through CHP engines or three dual fuel (biogas / diesel) boilers.

The final digestate is dewatered by centrifuge and transferred to one of three sludge cake silos for storage, while the thickener and dewaterer liquors are returned to the effluent stream for treatment. This liquor return is important since the sustainability of biological phosphorus removal is partly dependent on the mass of phosphorus returned in this way.

I know that site well. It is not true to suggest that it hasn't been updated since 60's. But civil assets are built with a 60 year design life, whilst electrical/mechanical are usually 20 years.

But none the less...more evidence of investment contrary to the misconception that "they have done nothing"