Who really owns our water?
The rise of private equity owners
Water and sewage issues are currently high on the public agenda, with highly publicised events of sewerage overflows into our waterways, rivers and seas. This has led to much conversation about how we could tackle these issues, and talk around water companies themselves, how they operate and how they are structured.
To really understand who owns our water and why we need to go back to the turning point in how our water industry was operated. In 1989 Thatcher’s government privatised the water industry. Privatisation came with the promise that the private sector would be more efficient, be better positioned to finance the investment that was needed in our waterways and would create healthy competition which would benefit the people. The reality is that water monopolies were created; there was and is no competition between these companies as they all operate in different areas.
Although three regulators were created to regulate the sector, this did not stop prices increasing and our water becoming more polluted.We regularly see that water companies have dumped more raw sewage into our waterways, with only 14% of our rivers in England being ecologically ‘good’. Our waterways are in a horribly polluted state. So, who really owns our water? Who is responsible for this pollution?
Water ownership, private equity and a rising pollution problem
Today, nine water companies are in existence in England. Welsh Water operates as a non-profit and Scotland’s water was protected from privatisation, remaining nationalised. So, the focus here is on English water companies, these being Anglian Water, Northumbrian Water, Severn Trent Water, South West Water, Southern Water, Thames Water, United Utilities, Wessex Water, and Yorkshire Water.
If we look at the ownership type, we can see that three of these companies are listed on the London Stock Exchange, two were delisted from the London Stock Exchange, and the other four are owned by private equity. Each of these companies has a complex corporate structure, meaning tracking the ultimate owners is difficult.
When looking through the annual reports of these companies in Companies House, 70% of water companies are owned by foreign entities, private equity, and pension funds. For instance, Southern Water, through a complex corporate structure, is ultimately owned by Greensands Holdings Limited, who are incorporated in Jersey. Greensands Holdings annual report shows that prominent Australian asset management firm Macquarie hold 62% of shares. Intriguingly, Macquarie acquired this stake a month after Southern Water received their record £90 million fine in July 2021 from the Environment Agency. More intriguingly, Macquarie previously held a stake in Thames Water when it received a £20 million by the Environment Agency.
Furthermore, it has been reported that Macquarie left Thames Water with an extra £2 billion debt burden. Much like Southern Water, South West Water is another water company guilty of a poor regulatory record with 163 enforcement actions since 2010. South West Water are similarly another example of an English water company who are owned ultimately by foreign investors. South West Water is a subsidiary of the Pennon Group PLC. The Pennon Group PLC are
registered on the London Stock Exchange. Their institutional shareholders include the investment giant Blackrock, which is an American investment firm, as well as another American investment firm, Vanguard. In fact, six out of the top 10 institutional shareholders are American headquartered investment or asset management firms. Furthermore, the French investment firm Amundi Asset Management, as well as a Norwegian investment firm, Norges Bank, also hold shares in the Pennon Group. Therefore, South West Water, through their parent subsidiary the Pennon Group PLC, has a heavy international shareholder presence.
But these are just two examples. Yorkshire Water, owned by Kelda Holdings Limited in Jersey, has shareholders from Singapore and Australia. While Wessex Water is owned by YTL (Malaysia), which is controlled by Malaysian billionaire Yeoh Tiong Lay.
Water companies are becoming synonymous with corporate misconduct with over 800 enforcement cases between them since 2010, pollution, and a lack of transparency in their structures and ownership. They are now notorious in the media, with many people knowing about their behaviour and wanting change. As a previous blogpost acknowledged, a lack of resources and political will have seen the Environment Agency struggle. The water companies are exploiting this weakness — the cases that have received enforcement action are only the tip of the iceberg. Whether intentionally or as a side effect of them doing business, water companies are continually dirtying our waters, with their complex and opaque corporate structures enabling the true owners to remain in the shadows and continue to operate with relative impunity.