Abu Dhabi writes off 9.9% stake in Thames Water

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Abu Dhabi’s sovereign wealth fund has written off its investment in Thames Water in a blow to the Labour government as it gears up to host a summit designed to attract big institutional investors to the UK.

Accounts filed in June by a Luxembourg-registered subsidiary of the Abu Dhabi Investment Authority (Adia), which holds a 9.9 per cent stake in Thames Water’s parent company, said that it had written down the entire value of its investment “due to the challenging regulatory environment and operational performance”.

Rachel Reeves, the chancellor, wants to convince global investors that Britain is open for business despite a Budget at the end of the month that is expected to increase taxes on wealth.

Next week’s summit, which Prime Minister Sir Keir Starmer is expected to open, is designed to promote investment in the UK, including in large infrastructure projects.

But the troubles faced by Thames Water, the UK’s largest water utility, are weighing on investors, who are concerned over what they perceive as an increasingly tough regulatory regime. Ofwat, the sector regulator, made a draft determination for water companies in June that prevented them from hiking customer bills for the next five years by as much as they had demanded.

Jon Phillips, chief executive of the Global Infrastructure Investor Association, said: “Some 30 international investors in UK water are also potential investors in energy, transport and digital infrastructure. But perceptions continue to be coloured by their experience in water, where the regulatory environment remains a red flag.

“In reaching its final determinations for the next five years, Ofwat must give greater priority to its duty to make the industry investible.”

Adia, which bought its stake from Macquarie in 2011, declined to comment on the writedown.

A government spokesperson said it was closely monitoring Thames Water, which remained “stable”.

The spokesperson added: “Our Water (Special Measures) Bill will create a level playing field through stronger regulation and secure £88bn of private-sector investment to upgrade our crumbling infrastructure, boost economic growth and create thousands of good, well-paid jobs right across the country.”

Guy Lambert, Adia’s head of utilities, was invited to a private meeting last month with Steve Reed, the environment secretary, according to a guest list seen by the Financial Times. During the meeting, investors complained about the regulation of the water industry, according to people familiar with the situation.

Crisis-struck Thames, which provides water and sewerage services to about 16mn households in England, is struggling under a £19bn debt load and risks running out of cash by Christmas.

The utility is racing to raise at least £3bn of equity to stave off being renationalised under the government’s special administration regime and make infrastructure improvements between 2025 and 2030. Its existing investors — which as well as Adia include a Chinese sovereign wealth fund and a Canadian pension fund — have refused to put more equity into the business and are willing to take up to £5bn losses.

Adia wrote down the value of its stake from £263mn to £1 at the end of last year, according to the accounts filed in June.

The writedown comes after a Singapore-registered subsidiary of Thames’s biggest shareholder, Ontario Municipal Employees Retirement System, said in accounts published in May that it would make “a full writedown” of its 31 per cent stake, as well as writing down loans given to the utility. The Universities Superannuation Scheme, the UK pension fund, has also said its stake in Thames Water was now worth “minimal” value.

Adia, which is one of Thames’s largest shareholders, has also taken a full writedown on a £31mn loan awarded to one of the holding companies that owns Thames.

Adia also owns a 16.7 per cent stake worth more than £580mn in Anglian Water, another of the UK’s largest suppliers of water and sewerage services, which serves 7mn customers.

Ofwat said: “We have received responses on our 2024 Price Review draft decisions from many organisations, including water companies, customers, environmental and consumer organisations, and investors. Inevitably these reflect a diverse range of views on the proposals we have made. We will consider all of these responses carefully and set out our final decisions on December 19.”

Thames Water declined to comment.

Additional reporting by Malcolm Moore in London