Tim Whittaker, Research Director at EDHEC Infrastructure & Private Assets Research Institute, was recently asked to comment in an article examining Macquarie Group’s decade-long ownership of Thames Water, whose precarious finances now pose an existential threat to the UK’s biggest water company:

““When the great financial crisis happened and interest rates went to the floor, Ofwat never revised what the cost of capital was,” said Tim Whittaker, a research director at the EDHEC Infrastructure Institute. “For years, Macquarie got away with just gearing up the balance sheet adding as much debt as it could, and it allowed them to rip that cash out essentially without the investment in the business itself.”

With Thames issuing cheap debt, money generated by the business could be returned to shareholders. Between 2010 and 2014, more than 70% of the cash available at Thames was sent to investors in the form of dividends and loan repayments, according to EDHEC analysis. Shareholders received nothing in 2007, and then more than £100 million in 2008. The payouts continued until 2017, totaling more than £1 billion in all, a large chunk of which would have gone to Macquarie.”

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