Thames Water Goes Sour For USS
Posted on 01/08/2024
Universities Superannuation Scheme has reduced the reported value of its stake in Thames Water by nearly two-thirds after the utility has continued to disappoint. However, USS remains committed to its Thames Water investment over the long term. The investment creates a division between the institutional investing goals of building infrastructure and receiving a profit. USS has lost £591 million so far. USS was eager to assure stakeholders that its position in Thames Water will not negatively impact its financial picture. In fact, USS has reported good news with a 2023 valuation reporting a £7.4 billion surplus and lower member and employer contributions beginning in 2024. There will also be improved benefits coming in 2024.
USS’ statement on Thames Water is below:
“The challenges facing Thames Water are the manifestation of historic under-investment over multiple decades and, more recently, the significant financial impact of soaring energy prices and other inflationary cost pressures. However, we have given our backing to Thames Water’s latest business plan.
As a long-term investor, we can provide patient capital and be an active, responsible steward of the company. While the value we place on our Thames investment may go up or down as part of our regular revaluations, we continue to view this as a long-term investment, in line with the long-term needs of the scheme. That is why we were willing to commit additional funds to the business in March 2023 and have shown willingness to commit more in the future.
We have not received a shareholder dividend or payments of interest on any shareholder loans since we first invested in 2017, with shareholders instead reinvesting capital back into the business to drive improvements. We remain of the view that, with an appropriate regulatory environment, the long-term objective of repairing important UK infrastructure and paying pensions to our members are in strong alignment.
The value we placed on Thames at the end of March 2023 was fully reflected in the USS Report and Accounts and our 2023 scheme valuation. Our diversified approach to investing means that we do not expect events surrounding Thames Water to have a material impact on our funding position, the reduction in contributions from January, the benefit changes from April, nor on the security of members’ promised pensions.”
