Rising risk of UK's Thames Water being broken up, JPMorgan warns
Adds detail and quotes from paragraph 4
By Marc Jones
LONDON, July 15 (Reuters) -The financial future of Britain's biggest water firm, Thames Water, looks increasingly uncertain in the wake of new pricing and spending limits laid out by regulator Ofwat, according to investment bank JPMorgan.
Britain's regulator told water companies last week they needed to fix leaks and cut sewage spills without raising bills as much as they had wanted, as a mounting financial crisis in the sector poses a test for Britain's new Labour government which has pledged to reform the industry.
Analysts at JPMorgan said they were concerned that Ofwat’s tough stance on financial resilience may increase balance sheet risks in the UK water sector and that Thames was now facing particular risks.
"Overall, our level of concern about Thames Water’s financial position is at new highs, and we are unsure if Thames’ situation can be resolved without a disruptive outcome for creditors," they wrote in a note published on Monday.
Britain's water industry has been in the firing line over the amount of sewage dumped in its rivers and seas, with critics saying the companies have under-invested for decades while taking out billions of pounds in dividends, piling up debt and paying large bonuses to executives.
JPMorgan described Ofwat's ruling that Thames should raise customer bills by 23% rather than the 39% it had been asking for, and that it should increase its total expenditure by far less than it had requested, was "broadly unfavourable".
It means the firm must now make "material revisions to its business plan, adjusting spending based on lower revenue recovery and slower asset base growth".
More broadly it needs to address what Ofwat described as an "inadequate" business plan rating, which ultimately drove the regulator to put Thames into a special 'turnaround oversight regime' (TOR).
For Thames to exit the regime it must demonstrate major improvements in operational and financial performance.
To help achieve this, Ofwat is suggesting that Thames consider: (i) a stock market listing, or (ii) a corporate split into two or more companies.
"Needless to say, the implications of Thames being in a TOR are materially negative," JPMorgan's analysts said, describing it as "overly intrusive regulation" likely to add to the company's pressures.
"We think its unlikely that Thames can exit the TOR naturally, meaning extreme outcomes like splitting the company are more likely," they said.
Reporting by Marc Jones; Editing by Amanda Cooper and Susan Fenton
Activos relacionados
Últimas noticias
Descargo de responsabilidades: Cada una de las entidades de XM Group proporciona un servicio de solo ejecución y acceso a nuestra plataforma de trading online, permitiendo a una persona ver o usar el contenido disponible en o a través del sitio web, sin intención de cambiarlo ni ampliarlo. Dicho acceso y uso están sujetos en todo momento a: (i) Términos y Condiciones; (ii) Advertencias de riesgo; y (iii) Descargo completo de responsabilidades. Por lo tanto, dicho contenido se proporciona exclusivamente como información general. En particular, por favor tenga en cuenta que, los contenidos de nuestra plataforma de trading online no son ni solicitud ni una oferta para entrar a realizar transacciones en los mercados financieros. Operar en cualquier mercado financiero implica un nivel de riesgo significativo para su capital.
Todo el material publicado en nuestra plataforma de trading online tiene únicamente fines educativos/informativos y no contiene –y no debe considerarse que contenga– asesoramiento ni recomendaciones financieras, tributarias o de inversión, ni un registro de nuestros precios de trading, ni una oferta ni solicitud de transacción con instrumentos financieros ni promociones financieras no solicitadas.
Cualquier contenido de terceros, así como el contenido preparado por XM, como por ejemplo opiniones, noticias, investigaciones, análisis, precios, otras informaciones o enlaces a sitios de terceros que figuran en este sitio web se proporcionan “tal cual”, como comentarios generales del mercado y no constituyen un asesoramiento en materia de inversión. En la medida en que cualquier contenido se interprete como investigación de inversión, usted debe tener en cuenta y aceptar que dicho contenido no fue concebido ni elaborado de acuerdo con los requisitos legales diseñados para promover la independencia en materia de investigación de inversiones y, por tanto, se considera como una comunicación comercial en virtud de las leyes y regulaciones pertinentes. Por favor, asegúrese de haber leído y comprendido nuestro Aviso sobre investigación de inversión no independiente y advertencia de riesgo en relación con la información anterior, al que se puede acceder aquí.
