A BBC investigation - Macquarie: The Tale of the River Bank - broadcast on BBC Radio 4 yesterday evening, has suggested that Australian bank Macquarie has left Thames Water with an extra £2 billion debt burden.
The funding was borrowed by Thames Water but used for the benefit of the bank and its investors, in apparent contravention of conditions laid down by Ofwat when Macquarie bought the water company in 2006, according to the BBC.
Macquarie and its investors sold their remaining share of the utility in March this year.
Martin Blaiklock, a consultant with international experience of privatised utility funding, carried out the analysis for the BBC
He concluded that the total returns made by the bank and its investors from Thames Water averaged between 15.5% and 19% a year under Macquarie's control, "twice what one would normally expect".
The bank has disputed the estimate of the total returns paid by Thames to Macquarie and its investors and referred the BBC to the 12.3% internal rate of return earned by its European Infrastructure Fund. Their investment in Thames Water was a part of this.
The BBC said:
“The transactions which culminated in Thames Water having the additional £2bn of debt on its books took place inside a network of companies set up by Macquarie at the time it bought Thames Water.
“A consultation paper published in February 2007 by the water regulator Ofwat showed that Macquarie and its investors paid £5.1bn for Thames Water, of which £2.8bn was money Macquarie had borrowed to help fund the purchase.”
A letter to Martin Blaiklock from Thames Water's then-chairman, Sir Peter Mason in October 2016 said that of the £2.8bn acquisition debt, at least £2bn had subsequently been repaid from new borrowings raised by Thames Water through a Cayman Islands subsidiary i.e. not by Macquarie and the investors who had originally borrowed the money.
A report on the BBC news website says:
“In reply to inquiries from the BBC, neither Ofwat nor Macquarie denied that the transactions transferring the £2bn debt from Macquarie and its investors to Thames had taken place.
“Nor did they deny that it ran counter to conditions set out at the time Macquarie bought Thames Water.”
Click here to listen to the BBC report
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