Nationalising Thames Water will discourage investment in UK infrastructure. This is the warning of a major bondholder.
Royal London Asset Management’s senior fund manager said that taking the heavily-indebted water company under public ownership would “risk spreading contagion” and affecting investment in other projects.
Shalin said that forcing Thames Waters creditors to accept losses could anger investors, at a time where Britain’s aging infrastructure desperately needs private investment.
Mr Shah stated that the “debacle could unfortunately spread to other infrastructure assets funded under similar regulations”.
Money manager claimed that this would increase the cost of consumers.
Mr Shah told Bloomberg that “political risks are still high around the balance of maintaining affordability for customer bills while allowing higher returns to unlock much needed investment in the industry.”
Royal London Asset Management holds a large amount of the bonds issued by Thames Water and its parent company Kemble.
The warning comes at a time when the Government is under increasing pressure to act to help Thames Water, after Kemble failed last week to pay an interest on a £400m Loan.
Investors and regulator Ofwat are at odds over the amount Thames can raise bills by.
Thames Water, a company that serves 15 million customers across the south of England is buried under a £18bn debt, most of which was accumulated by its previous owner Macquarie.
The government could be forced to intervene in the current cash crunch and place Thames Water under special administration, a form nationalisation at a huge cost to taxpayers.
The fear that debt holders of Thames Water could face losses has increased.
A group of Thames Bondholders is said to have hired Jefferies Investment Bank and Akin Gump Strauss Hauer & Feld as advisers during restructuring discussions.
Thames has asked that its lenders refrain from taking creditor action in order to strengthen its balance sheet.
Last week, it was revealed that Thames was exploring an extreme breakup plan in order to manage its cash crisis.
Thames would be divided into two companies, one for London and another for the rest of Thames’ operations in the South East. This structure is believed to make it easier for a competitor to buy parts of the company’s businesses once its finances have been stabilized.
Thames Water has declined to comment.
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