According to analysis by the Guardian, foreign investment corporations, private equity, pension funds, and companies registered in tax havens possess more than 70% of the water sector in England.
As the public and some politicians clamour for the sector to be held accountable for sewage dumping, leaks, and water shortages, the intricate web of ownership is exposed. As pressure mounts on the sector to invest more money in repairing and replacing deteriorating infrastructure to safeguard the environment and the general public’s health, six water corporations are being investigated for possibily criminal acts.
Control of the water business has changed more than three decades after the sector was sold off with the promise that the public would become individual small shareholders or “H2Owners.” by offshore investment entities, the ultra-wealthy, tax haven-based businesses, and pension fund investors. According to Dr. Kate Bayliss, a research associate in the department of economics at Soas University of London, the ownership structure is such that transparency and accountability are constrained.
Numerous well-known international investment funds and sovereign wealth funds are among those with sizable investments. According to a study of shareholdings as of October of this year, the US investment firm BlackRock and its subsidiaries controlled approximately 10% of the equity in Severn Trent, while the Qatar Investment Authority, with a 4.6% stake, is the third largest Analysis of shareholdings as of October this year shows that the US investment firm BlackRock and its subsidiaries owned approximately 10% of the market.
According to the research, 8.7% of Thames Water is controlled by China, and 9.9% is held by an affiliate of the Abu Dhabi Investment Authority. More than 100 shareholders in England’s nine major water and sewerage corporations as well as six smaller businesses have been followed by The Guardian. According to the analysis, companies in 17 different nations control at least 72% of the market, with 10% owned by UK companies. In total, 82% of the water sector’s ownership was identified.
In England, most water companies are currently privately held. just three, Severn Trent, and the South West subsidiary Pennon Group The stock market lists and United Utilities. However, the same kinds of infrastructure funds and private equity firms that own water businesses privately hold the majority of their shares.
The ownership structures in the business have been the subject of academic study by Bayliss, who concluded: “This is a pretty different paradigm from how one might expect a private corporation to behave. The owner is not only trying to increase sales, cut costs, and keep the profits. Private equity gains are more likely to be attained through financial engineering or business financial restructuring than through increased efficiency. “Revenue extraction is given significantly more attention than a company’s long-term viability,” Risky financial frameworks are produced. We have witnessed some retail companies collapse with this private equity structure,” she added.
According to Bayliss, some water businesses’ ownership structures were so convoluted and opaque that it was difficult to determine their precise owners. “Is it feasible to determine where money is flowing from? You’ll never grasp it, several of the fund managers with whom I’ve spoken have informed me. You simply can’t figure it out unless you are an insider.
With investment firms holding over 17% of all English water businesses, the US has the strongest presence globally. The second and third largest overall investors in English water are Canadian and Australian firms.
Severn Trent, United Utilities, Pennon, and Bristol Water are all investments of BlackRock. In the English water business, there are also other US private equity companies with a presence. The Vanguard Group and Lazard Asset Management both hold shares in Pennon, Severn Trent and United Utilities.
Thames and Anglian Water are both owned by two Canadian pension funds, the Ontario Municipal Employees Retirement System and the Canada Pension Plan.
Following Southern Water’s £90 million penalties for discharging billions of litres of raw sewage into the coastal seas off Kent and Hampshire, Macquarie, an Australian investment group, intervened to support the company with a £1 billion injection. The judge stated that the fine followed a history of illegal activity for prior and ongoing environmental degradation.
Southern is owned by 62% of Macquarie, which in November posted half-yearly earnings of more than £1.3 billion. The US financial business JP Morgan Asset Management also owns 15% of the water utility.
IFM Global Infrastructure Fund, another Australian investment company, has a 20% stake in Anglian Water, whose parent company, Anglian Water Group, is registered in the tax haven of Jersey. 11% of English water is overall under the ownership of Australian investment firms.
At least 5% of the sector is controlled by Asian-based businesses. The Cayman Islands-registered CK Hutchison Holdings Limited, the commercial conglomerate of Li Ka-shing, the richest person in Hong Kong, eventually owns Northumbrian Water, which serves 2.7 million people in north-east England.
For £867 million this summer, the CK Group sold a 25% share in Northumbrian to the privately held equity company KKR, which is listed in New York.
A network of private investment organisations with headquarters in Singapore, the US, Germany, and Australia as well as an Australian pension fund owns the water system in Yorkshire that supplies households and businesses with water and treats wastewater. They are the owners of Jersey-based Kelda Group, parent firm of Yorkshire Water.
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