You wouldn’t think the financial meltdown of a U.K. utility would inflict billions in losses for some of the largest Canadian investors, but that’s exactly what the demise of Thames Water is doing.
What happened: Export Development Canada (EDC) reported that it has lost £350 million (over $650 million) on loans to Thames Water, a private British company that provides water and sewage services to around a quarter of the U.K.’s population.
-
Thames Water is facing potential nationalization as it struggles under a crushing debt pile, decaying infrastructure, and fines for breaches of environmental regulations that some estimate could exceed £1 billion.
Catch up: EDC began lending to Thames Water in 2018 to shore up an investment made by another large Canadian institutional investor, the Ontario Municipal Employees Retirement System (OMERS), which had acquired a 31% ownership stake in the utility (a stake it wrote down to zero last year).
-
B.C.’s public sector pension manager also owns 8.7% of the troubled utility.
Why it matters: The slow-motion collapse of Thames Water is a substantial blow to a number of Canada’s largest institutional investors, many of which have significant exposure to Britain’s infrastructure.
Yes, but: For large institutional investors like OMERS, Thames Water is a small piece of a much larger balance sheet, and even serious one-off losses like this are a risk that comes with owning a global, diversified investment portfolio.—TS
