Ofwat may want to supply better evidence for being tough on water firms
Ofwat is not a complete patsy and is in the business of holding companies to account, the chief executive of the water regulator argued on the Today programme on Tuesday. David Black even waved a metaphorical big stick at a couple of firms. “I think that companies like Thames and Southern really need to up their game,” he said.
He described Thames as “a repeated poor performer”. And he said Ofwat’s £126m penalty on Southern in 2019 for wastewater and reporting breaches was instrumental in forcing a change of ownership last year. “That’s an example of a company that performed poorly, that was held to account by Ofwat and the investors lost their shirt,” argued Black. “That is exactly as it should be.”
What this breezy accounted omitted to mention, however, was that the Ofwat-approved rescuer of Southern Water was none other than Macquarie, the giant Australian financial outfit whose ownership of Thames from 2006 to 2017 was characterised by supercharged debt financing, heavy dividend extraction, missed leakage targets and a major sewage-dumping prosecution. Even Ofwat seemed to cheer when Macquarie left the capital; its chairman at the time called on the new owners to make “a step-change” in the way Thames “operates and behaves”.
The decision to welcome back Macquarie at Southern, which serves 4.7 million people in Kent, Sussex, Hampshire and the Isle of Wight was therefore mystifying. The justification given was that Macquarie came bearing good intentions and a much-needed capital injection of £1.07bn. Possible translation: Southern was in such a financial mess that any rescuer, whatever its previous record in the sector, was better than none. If so, that is not what most observers would describe as life proceeding “exactly
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