We all know the Water Works, it’s the boring investment you make that yields you steady income, especially if you have a monopoly on utilities.

Except that is , when the Water Works is mortgaged. Then it yields you nothing and is a worthless piece of paper.

Which is how those earning shares in Kemble, Thames Water’s parent company, must be feeling right now. There were a few journalists phoning me and maybe you yesterday looking for the pension story in Kembles’s admission that it wasn’t paying its debts at the moment.

To be mortgaged is one thing, but not to be able to pay your mortgage payments see you lose ownership of your property at a substantial discount. The obvious distress is to the shareholders that include USS. In practice, USS could lose the book value of Thames Water and still be 98% as strong on paper. Con Keating estimates that the current realisable  value of Thames Water’s shareholding is 0.5% of USS’ total assets.

What the investment does for the reputation of its investment department is another thing, but the impact of the further write down of the investment on the scheme’s capacity to pay pensions should be minimal.

The much bigger story is Thames Water’ two staff pension schemes.

Thames Water Pension Scheme (“TWPS”) and Thames Water Mirror Image Pension Scheme (“TWMIPS”)

Between them they have £1.7bn of pension obligations (over £2bn on a section 75 buy-out basis). In September last year, shares needed to be issued to meet the £20.3m of pension contributions due from the sponsor to the scheme.

The sponsor is Thames Water itself and that covenant looks more vulnerable if Kemble fails. It Thames Water itself runs out of money the the  Thames Water pension schemes fall into the PPF unless an alternative covenant is arranged.

But that is only half the story. The Thames Water Pension Schemes are the two lights in the darkness. Lux in Tenebris – in the gloom the gold gathers the light about it.

The irony is that the Thames Water schemes are sound and an extremely attractive long-term proposition. If anything in the benighted world of Thames Water, is worth investing in, it is the long-term future of its pension scheme.

Which is why I am sure that it would see no shortage of suitors. What is needed by Chris Weston is a good news story. By my reading of the accounts, while the utility is currently unavertable, its Pension Scheme is. In the short term, a scheme rescue by way of a Capital Backed Journey Plan could release Kemble from short-term, cash flow obligations to fund the plan and set the scheme on course to becoming a positive asset both to pensioners and to the business. It could even pay the contributions to Thames Water’s workplace pension,  (a master trust).

We read a lot about the Pensions Regulator’s new mindset, one where it assists Britain to become more rather than less productive. For two decades, pensions have been a drag on the performance of our quoted and unquoted corporates, right now pensions have the opportunity to give back some of the deficit contributions that have come their way.

Many of us would argue that those contributions were unnecessary and lament the carnage of the LDI blow-out in 2022 which gave away so much of the unseen advantage built up in schemes. But what’s done is done, we must move on.

Thames Water’s pension schemes can and should move on. Should they have offers on the table from co-investors, they should be considering them, so should  the Pensions Regulator.