Chris Giles has written a pretty heroic opinion piece in today’s FT

There’s a free link to the article here. (if the link’s run out, email henry@agewage.com or better – get an FT subscription).

Chris’s point is that for all the complexity of Thames Water’s corporate structure, what it does is pretty simple. Getting our water back to the standard we expect will take investment and the current shareholders have to work out in what circumstances Thames Water is investable.

My particular interest is in investing to keep Thames’ two pension schemes from being a cashflow issue for the operating business and an impediment to investment. In the longer term Thames Water’s pension schemes could be an asset to the business.

Time is of course something that pension schemes have on their side and if Thames Water is to turn the tide, it will be because its shareholder’s – primarily pension and sovereign wealth funds see the current difficulty as a moment (and only a moment) in time. Bad timing as their investment appears to have been, the large pension funds that have invested in Thames Water’s parent Kemble, have got time to redeem the money spent and profit. But this will almost certainly spending more money on the utility,

There are those who argue that there is no way that such an investment can be in the interest of the pension scheme members. This comment expresses that opinion pretty well,

The Thames Water story (and of most other UK water companies) is that privatised monopoly does not work unless you regulate so hard you might as well have not bothered privatising in the first instance.

When the company ethos inevitably descends into simply providing dividends at the expense of most investment there can be only one conclusion. In this instance the collapse has been further abetted by the government in power turning a blind eye to the failings of its ‘market forces’ holy cow.

The entire water industry is going to have to be re-nationalised as no government will ever have enough political capital to allow the significant raising of bills to cover previous capital outflows (aka selling the family silver).

This point of view ignores the obvious redemptive capacity of time – delivered through patient capital. As mentioned above, if the current problems are considered a road bump rather than a road-block, then I think a way forward can be agreed. There needs to be dialogue and this includes dialogue from Thames Water’s own pension scheme with those offering it capital support.

I am not a party to the behind the scenes discussions going on between shareholders, executive and regulator but there needs to be an agreement. As Chris Giles concludes, this is all about time.

It is vital therefore for regulators to demonstrate a strict separation of past and future. Private water companies need to accept losses for risks they knowingly took. If they do so, regulators can then make the case for higher bills to reduce pollution in rivers.

This is a big test of UK capitalism. Get Thames Water right and the case for private ownership of utilities will be enhanced. Any attempt to bail out private investors for their own mistakes with customers’ money will create an even greater stink than already exists.

The Thames at Bourne End