From Morningstar: 2024-04-03 20:40:00

Residents in the south of England discovered serious problems with drainage and disposal when human waste started floating down the street. Thames Water, the largest water company in the UK, is facing collapse after refusing to pass on improvement costs to customers. If it defaults, the government may take over the company. Analysts warn that investor confidence in the UK water sector could suffer, leading to higher bills for customers of other water utilities. Despite calls for nationalisation, it is unlikely to impact the rest of the utilities sector. The upcoming general election in the UK makes it uncertain if Thames Water will be nationalised. Investors should consider the case of Wessex Water, which has a stable ownership structure. A documentary by Joe Lycett highlighted the issue of large companies paying dividends at the expense of infrastructure projects and corporate governance. Former owner Macquarie has been accused of using Thames Water’s assets to pay dividends instead of addressing infrastructure issues. Investors should be cautious about companies paying dividends financed by debt instead of profits and cash flows.



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