The financing of the pension contribution with further debt against new equity issued to TWUHL is an insult to investors. Capital has been offered to the trustees so that an SLP can co-sponsor the two pension schemes. This would enable the pension schemes to run on without troubling its sponsor with further demands. The SLP would enable the pension fund to pay pensions in full. For some reason, the trustee has decided not to enter into discussions on this offer.
I see PWC are their auditors. Must have generated considerable fees to PWC or their predecessors, setting up all these arrangements. Begs a question about the ethics of auditors, not dissimilar to the ethics of the lawyers advising the Post office over the Horizon scandal.
The sheer length and number of the notes to the accounts says an awful lot...
In this and other sectors there are difficult questions over whether regulators can ever be sufficiently effective given the legal and financial firepower of those they are trying to regulate and the risk of regulatory capture. Utilities, finance, tech and Boeing come to mind.
1) Surely this is fraud. Dividend paid has disappeared so that external shareholders who purchased in good faith have received nothing since Macquarie's exit while the enforced customers in this non-market market have no option to change supplier. Why has there been little action from Ofwat (mainly performance fines which make the financial problems worse) and no action - at least investigation AFAIK - from the Serious Fraud Office and the Financial Services Authority?
2) The past and present directors as well as the PWC (and any other accountants) who devised this scheme must have realised the potential for fraud and are so complicit. Can no action be taken against them?
3) Would this corporate structure devised purely to extract (steal) wealth be permitted anywhere else, even in the US?
4) Are any of the other privatised utilities (particularly water companies) similarly structured?
I agree Macquarie's financial shenanigans are sickening, but I don't think they are actually fraudulent. I may be wrong, though - there are areas of complexity that I didn't even try to unpick., and in my experience extremely complex structures often conceal fraud. If there is fraud, then the present and former directors are on the hook, along with any firm that advised on setting up these schemes.
Ofwat is a disaster - indeed all the regulators of privatised utilities are. The ideological belief that the private sector is always best has resulted in insufficient safeguards against predatory capitalists like Macquarie and wholly inadequate regulation of the structure and activities of privatised utilities. At the end of the post I suggest some major changes to the regulatory regime, but really this should be a whole new post.
The FCA has no jurisdiction in this case. The Competition Markets Authority does, though. Hilariously, Thames Water has threatened to refer itself to the CMA if Ofwat tries to impose requirements on it with which it can't (or won't) comply.
Complex corporate structures devised purely to extract cash and/or avoid tax are commonplace throughout the world. The US's tax system makes it more difficult to hide wealth in tax havens, but TW doesn't appear to be doing that.
Most of the privatised water companies have similar structures to Thames Water (and are in similar difficulties). The exceptions IIRC are Welsh Water, which is owned by a simple not-for-profit company (Glas Cymru), and Scottish Water, which is publicly owned. Many other privatised utilities also have extractive superstructures.
Thank you Frances for the post and clarification. But IMHO if it looks like fraud, walks like fraud and quacks like fraud, it is generally fraud. It is ironic that while the CMA has some jurisdiction over this market which is not a market by design, the FCA has none. The price of re-nationalising the industry in England would be prohibitive and the activities of all water companies appear to ensure this. It looks like a financial crime visited upon the shareholders and consumers about which we can do nothing.
The financing of the pension contribution with further debt against new equity issued to TWUHL is an insult to investors. Capital has been offered to the trustees so that an SLP can co-sponsor the two pension schemes. This would enable the pension schemes to run on without troubling its sponsor with further demands. The SLP would enable the pension fund to pay pensions in full. For some reason, the trustee has decided not to enter into discussions on this offer.
I see PWC are their auditors. Must have generated considerable fees to PWC or their predecessors, setting up all these arrangements. Begs a question about the ethics of auditors, not dissimilar to the ethics of the lawyers advising the Post office over the Horizon scandal.
The sheer length and number of the notes to the accounts says an awful lot...
In this and other sectors there are difficult questions over whether regulators can ever be sufficiently effective given the legal and financial firepower of those they are trying to regulate and the risk of regulatory capture. Utilities, finance, tech and Boeing come to mind.
this is the sort of arrangement (and disaster) one might expect to find, oh, ca 1910, back in robber baron days...
but here we are.
read in (and this written from) U.S., but no matter I think.
1) Surely this is fraud. Dividend paid has disappeared so that external shareholders who purchased in good faith have received nothing since Macquarie's exit while the enforced customers in this non-market market have no option to change supplier. Why has there been little action from Ofwat (mainly performance fines which make the financial problems worse) and no action - at least investigation AFAIK - from the Serious Fraud Office and the Financial Services Authority?
2) The past and present directors as well as the PWC (and any other accountants) who devised this scheme must have realised the potential for fraud and are so complicit. Can no action be taken against them?
3) Would this corporate structure devised purely to extract (steal) wealth be permitted anywhere else, even in the US?
4) Are any of the other privatised utilities (particularly water companies) similarly structured?
I agree Macquarie's financial shenanigans are sickening, but I don't think they are actually fraudulent. I may be wrong, though - there are areas of complexity that I didn't even try to unpick., and in my experience extremely complex structures often conceal fraud. If there is fraud, then the present and former directors are on the hook, along with any firm that advised on setting up these schemes.
Ofwat is a disaster - indeed all the regulators of privatised utilities are. The ideological belief that the private sector is always best has resulted in insufficient safeguards against predatory capitalists like Macquarie and wholly inadequate regulation of the structure and activities of privatised utilities. At the end of the post I suggest some major changes to the regulatory regime, but really this should be a whole new post.
The FCA has no jurisdiction in this case. The Competition Markets Authority does, though. Hilariously, Thames Water has threatened to refer itself to the CMA if Ofwat tries to impose requirements on it with which it can't (or won't) comply.
Complex corporate structures devised purely to extract cash and/or avoid tax are commonplace throughout the world. The US's tax system makes it more difficult to hide wealth in tax havens, but TW doesn't appear to be doing that.
Most of the privatised water companies have similar structures to Thames Water (and are in similar difficulties). The exceptions IIRC are Welsh Water, which is owned by a simple not-for-profit company (Glas Cymru), and Scottish Water, which is publicly owned. Many other privatised utilities also have extractive superstructures.
Thank you Frances for the post and clarification. But IMHO if it looks like fraud, walks like fraud and quacks like fraud, it is generally fraud. It is ironic that while the CMA has some jurisdiction over this market which is not a market by design, the FCA has none. The price of re-nationalising the industry in England would be prohibitive and the activities of all water companies appear to ensure this. It looks like a financial crime visited upon the shareholders and consumers about which we can do nothing.