The Thames Water crisis is rippling out towards Macquarie

afr.com:

London | The existential crisis engulfing Britain’s largest water utility, Thames Water, has thrown a powerful spotlight on one of the UK industry’s most high-profile players: Macquarie Group.

As the British government contemplates a temporary nationalisation of the beleaguered utility – or at least a socialisation of its unsustainable £14 billion ($27 billion) debt pile – there is the risk of reputational fallout for Macquarie, as Thames Water’s controversial former custodian.

Repair job… Thames Water’s debt pile is unsustainable. Bloomberg

Macquarie has a significant presence in British infrastructure, and can ill afford the persistent media perception that its ownership from 2006 to 2017 is one of the factors at the root of this crisis. There is also a more specific risk: two years ago, Macquarie bought into another of the largest and most debt-saddled water and sewage companies, Southern Water.

Southern was among the water utilities at the forefront of a recent and sustained spate public and media outrage about pollution. This campaign forms the backdrop to the degree of popular and political intensity around Thames Water’s financial crisis.

It is possible that the Thames Water crisis will mushroom into a full-blown overhaul of how England’s water sector is regulated, and will reset expectations of how the utilities operate. This could ripple out into the financial model on which Macquarie’s £1 billion-plus investment is based.

Some of Thames Water’s major shareholders seem prepared to stick with the company, suggesting it may be able to raise yet more equity, restructure its debt and stave off insolvency.

A more likely option is that the government will step in, as it did with collapsed energy supplier Bulb last