Companies in the news ... and how they were assessed
Thames Water: milked?
Thames Water is in trouble again, said Gill Plimmer in the Financial Times. In March, it was fined £20.3m for releasing 1.4 billion litres of raw sewage into the Thames, in a move a judge described as “borderline deliberate”. And now the regulator, Ofwat, has slapped the utility, whose investors include pension and sovereign wealth funds from China, Abu Dhabi and Kuwait, with a second fine, of £8.55m, for its “unacceptable” failure to control water leakages. Ofwat reckons that 180 litres a day are lost for every property that the group supplies, due to underinvestment in infrastructure. Yet Thames paid out some £100m in dividends to investors in the year to March. “Thames Water is the company that gives even doubters cause to wonder whether renationalisation of the water industry might be a good idea,” said Nils Pratley in The Guardian. It operates “within a labyrinth of intermediary offshore companies that makes it impossible to calculate how much the owners have made over the years”. Even insiders concede that the Australian financial outfit Macquarie “made a packet” before it sold its final stake in Thames this year. “Nationalisation isn’t obviously a good answer” – it would mean huge upfront costs. But Ofwat should “push a lot harder” to “beef up the regulatory system”.
Standard Life/scottish Widows: lowland fling
Investors this week gave their seal of approval to Standard Life’s £11bn merger with Aberdeen Asset Management, said Greig Cameron in The Times. The deal will create “a powerhouse British investment company” with some £670bn in assets under management. But will it be big enough for Standard Life chairman Gerry Grimstone? Maybe not. The rumour mill in Edinburgh has been whirring with reports that Standard Life is now planning a second big tie-up – this time with Scottish Widows, which is currently owned by Lloyds Banking Group. Grimstone denied negotiations had already started but, reportedly, talks could begin in August. The potential merger of two of the Scottish capital’s biggest employers was greeted with gloom locally, said the Edinburgh Evening News – there are “fears more jobs could be threatened”. But there’s actually “real, hard commercial logic in banging together” these two “titanic former mutuals”, said Iain Dey in The Times. The tricky bit will be figuring out how the deal is structured. One thing is certain: “after almost 200 years of fighting one another in relentless and brutal competition”, an amicable tie-up would shake Edinburgh “to its foundations”.
Co-op Bank: saved for the nation?
“Public anger at mainstream business” appears to have “prompted a revival in co-ops”, said Harry Wilson in The Times. UK consumers spent almost £36bn with the country’s 7,000 independent cooperatives last year, according to a new survey by Co-operatives UK, with “active” membership shooting up to 13.6 million Britons, from 12 million in 2015. There’s good news, too, for the Co-op Bank – the troubled outfit formerly chaired by “Crystal Methodist” Paul Flowers, said Simon English in the London Evening Standard: its future looks to be on a more secure footing. Hopes that an outside bidder could salvage the troubled bank have “faded”. But at least it is in “advanced discussions” with existing investors over a rescue deal. Who are these white knights upholding the nation’s proud cooperative history? US hedge funds, naturally.