Two Canadian pension plans risk reputation hit from investments in troubled Thames Water

financialpost.com:

A troubled water utility company in the United Kingdom that counts two of Canada’s biggest public pensions as large shareholders is facing regulatory scrutiny and fines for sewage leaks and could require a financial bailout.

The Ontario Municipal Employees Retirement System (OMERS) and British Columbia Investment Management Corporation (BCI) own 31.8 per cent and and 8.7 per cent of Thames Water, respectively. Analysts at DBRS Morningstar said in a July 5 report that OMERS and BCI are expected to weather the storm with minimal financial damage given their size,  diversification and long-term performance — even if Thames Water were to collapse — but there is reputational risk for the Canadian pensions, which could affect future investment opportunities.

Thames Water is the largest water utility in the U.K., serving about a quarter of the population. It is heavily indebted and has faced financial difficulties in the face of rising interest rates. Investors have been called on to pony up £1 billion, after injecting £500 million in March, to upgrade infrastructure and help manage the £14-billion debt load. However, the U.K. government is now understood to be considering a range of options to stave off the collapse of Thames Water, including the possibility of placing it into a special administration regime that could take the company into temporary public ownership and result in financial losses to the current shareholders, according to the DBRS report.

One of Thames Water’s large shareholders, the £90-billion Universities Superannuation Scheme, which has a 20 per cent stake in the utility, has publicly pledged support for Thames Water. It will face questions about its stake in Thames Water from the U.K.’s pension regulator,