Unlock the editor’s summary for free
Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
The besieged water sector of England is Taking out all the stops To attract investors, guaranteeing income and risks of limitation.
The Wat water regulator wants to attract £ 50 billion of investments for new infrastructure projects. Instead of getting public service companies to assume more debts, and add the cost directly to customer invoices, these projects are being presented to separate the tender. That means that third parties would design, build, finance and potentially operate this new infrastructure, and costs would be recovered through a surcharge in the invoices of customers who are outside the normal price review process.
Attracting new sponsors to the problematic water sector of the United Kingdom has some attractions. The balances of existing suppliers have already been rinsed. English profits are already loaded with £ 74 billion loans after paying £ 83 billion In dividends in the last three decades.
While water invoices have fallen in real terms since 2010, from privatization they have increased much faster than general inflation: 363 percent according to a parliamentary debate. Meanwhile, the investment has only drove; The newcomers will assume projects that represent 36 years of catching up with excavation deposits and another infrastructure.
Earning investors will be launched, in some cases literally, in confused waters. There are multiple regulators, including OFWAT, the Drinking water inspection he Water Consumer Council and the Environment Agency. Also in the mixture: angry consumers, equally unhappy creditors and Welf -remunerated water bosses. TO review It must be completed soon by Sir Jon Cunliffe, president of the Independent Water Commission, can re -draw the landscape.
With the water sector in such a poor way, the tender of specific projects to newcomers may not seem like a bad idea. The cost of the projects must still be added to the invoices. But the regulator’s hope must be that, when making bidders compete, it can reduce the cost for consumers.
The main problem is that this type of structure further fragments the system. Operationally, the property of specific assets may not be ideal when administering an integrated water system.
In addition, those who win the bidding process, at least under one of the planned roads, will not be licensed directly by the regulator. Instead, they will be indirectly supervised through their agreement with the local utility, which will still keep the license. Investors can take advantage of the financial magic of lawyers and bankers to structure contracts. But that still seems a recipe for disputes.
No less important, the outsourcing of such key responsibilities to suppliers without a license is difficult to square with the essential nature of the services in question. Water must still get out of the taps. Any important perception, and is for the government and regulators that the public will inevitably change.