UK's green bank abandons Britain: Promise to back UK ditched in rush to privatise firm

Macquarie? Predator? I’m shocked.

‘Britain is open for business!’ is the mantra the Tories keep proudly repeating. What they mean is that the Tory Government welcomes supposed foreign investors, believing that money flowing into Britain creates jobs and tax revenues. But foreign investors do not come to Britain because they love us and because they have our best interests at heart. They usually come to take as much of our money from us as they can.
There are two main ways foreign investors plunder Britain – ‘Buying the Brand’ and ‘Milking the Cash Cow’
Buying the Brand
American Kraft’s takeover of Cadburys is a perfect example of this. Kraft made an absolute promise to worried MPs that their takeover of Cadburys would not lead to job losses in Britain. But the ink had hardly dried on the takeover deal than Kraft began shutting British factories and firing British workers so they could move production of traditional British products to Poland where pay is one third of the equivalent British worker.
Milking the Cash Cow
This is perhaps the most blatant and iniquitous way foreigners fleece us. We see it most clearly in our utility companies – water, gas and electricity suppliers. These companies are wonderfully reliable cash cows – they all have virtual monopolies and produce huge amounts of operating profits every year. So they are hugely attractive to foreigners looking for easy billions.
Macquarie’s looting of Thames Water is an excellent example of how the Tory Government and our pathetically supine supposed regulators (Ofwat and Ofgem) allow foreigners to fleece us.
In 2000 the company was bought by the German RWE for £6.8 billion. Over the six years of its ownership, RWE pocketed around £1 billion in dividends. It then sold Thames to Macquarie for £8 billion. So RWE made around £2.2 billion – about £30 million a month or £1 million a day -from its brief ownership of Thames. Yet during its ownership RWE was allowed to increase water bills well above inflation by claiming it needed the money to invest in reducing leakage.
In addition to its exploitative high prices, for years Thames further increased its profits by selling off land and facilities to people like property developers. When asked why it had closed twenty five bulk water storage facilities, Thames (Macquarie) explained, ‘all these sites were shut down when they became surplus to operational requirements following upgrades to our network.’ At the same time as Thames was saying this, it had imposed a hosepipe ban due to a lack of water.
Then the looting of Thames Water’s unfortunate customers really moved up a few gears. Being smart, Maquarie used Thames Water’s abundant cash flow to borrow money – £11.4 billion. Supposedly these billions were for ‘investment in upgrading London’s water system.’ In fact, Macquarie used much of this borrowed money to pay itself huge dividends year after year. Who lent these billions to Macquarie? It was companies owned by Macquarie and based in a tax haven (Jersey) which were the lenders.
Macquarie loaned itself billions at a very generous rate of interest. This had two benefits. Firstly, the interest payments were tax-deductible. In the 10 years Macquarie has owned Thames Water, it has paid a miserable £100,000 in corporation tax. Secondly, by loaning itself money at a high interest rate from companies based in a tax haven, Macquarie made much of its profits from owning Thames Water by lending money to itself and these profits were, of course, out of reach of the British tax authorities.
What has happened at Thames Water has been repeated at many other water, gas and electricity suppliers. In 1999 British water companies had debt levels of 20%. By 2015 they were over 80%, and, as with Thames Water, much of this borrowed money has been used, not to invest and create jobs in Britain, but to pay massive dividends to rapacious foreign owners.
In yet another example of our pathetic Government, the Tories begged the Chinese and French to build nuclear power stations in Britain based on a design that does not work, then sell us the electricity generated at three times the current price.
Britain is definitely open for business – open for foreign businesses to fleece us.

Macquarie has left Thames Water with an extra £2 billion debt burden. The £2 billion was borrowed by Thames Water in 2007 and 2010 but used for the benefit of the bank and its investors, which owned and controlled Britain’s biggest privatised water company. This was in contravention of conditions laid down by the regulator when Macquarie bought Thames in 2006.
Macquarie said its ownership had made Thames ‘financially stronger.’ They sold their last share of Thames Water in March 2017. Martin Blaiklock, a consultant with international experience of privatised utility funding, concluded that under Macquarie’s control, the total returns made by the bank and its investors from Thames Water averaged between 15.5% and 19% a year. Blaiklock has 40 years of experience in such matters and said these returns were ‘twice what one would normally expect.’
Diabolical maintenance
The disclosures follow scrutiny of the possible financial causes of Thames water’s extensive pollution of the Thames, and other rivers, with untreated sewage between 2012 and 2014 when the company was under Macquarie’s control. The Environment Agency prosecuted Thames Water over the pollution and, in March 2017 the company was fined £20m – a record for such an offence.
At Aylesbury Crown Court, Judge Francis Sheridan said there had been ‘inadequate investment, diabolical maintenance and poor management.’ Assessing incidents as being in the ‘reckless’ or ‘borderline deliberate’ category, Judge Sheridan concluded: ‘Knowledge of what was going on went very high indeed.’
Thames Water (Macquarie) accepted that there was a failure of management, but denied there was a link between the sewage pollution and high investor returns. Macquarie said there have been ‘significant management changes’ since that time.
Pay-back time
The transactions which culminated in Thames Water having the additional £2 billion of debt on its books took place inside a network of companies set up by Macquarie at the time it bought Thames Water. A consultation paper published in February 2007 by the water regulator Ofwat showed that Macquarie and its investors paid £5.1 billion for Thames Water, of which £2.8 billion was money Macquarie had borrowed to help fund the purchase.
What subsequently happened to that £2.8 billion so-called ‘acquisition debt’ is revealed in a letter, dated October 2016, from Thames Water’s then-chairman, Sir Peter Mason, to Martin Blaiklock. It was written in reply to questions arising from Mr Blaiklock’s attempts to understand Thames Water’s offshore financial structure.
Sir Peter revealed that, of the £2.8 billion acquisition debt, no less than £2 billion had subsequently been repaid. Not by Macquarie and its investors, who had originally borrowed the money, but from new borrowings raised by Thames Water through a Cayman Islands subsidiary. Blaiklock said ‘That letter was a red flag to me because it showed clearly that the debt which Macquarie funds had used to buy Thames Water had been transferred over to Thames Water. So now, it was a responsibility of Thames Water and not of Macquarie.’
The transactions are particularly surprising because, in a February 2007 consultation, Ofwat disclosed that as part of Thames Water’s license to operate as a regulated business, it was to be treated as a ‘separate company’ from Macquarie and the investors who owned it. Referring specifically to the £2.8 billion acquisition debt, Ofwat’s consultation said: ‘This debt would be fully ring-fenced from Thames Water as the regulated entity.’ But, as Sir Peter Mason’s letter discloses, that is not what subsequently happened.
In reply to inquiries from the media, neither Ofwat nor Macquarie denied that the transactions transferring the £2 billion debt from Macquarie and its investors to Thames had taken place. Nor did they deny that it ran counter to conditions set out at the time Macquarie bought Thames Water.
Since selling its final share of Thames Water (or rather Kemble, its parent company), Macquarie and its investors are out of the picture, taking the benefit of the £2 billion debt repayment with them while leaving Thames Water with total debts of £11 billion (up from £1.6 billion when they took it over) and an on-going £4.5 billion five-year capital expenditure to deliver by March 2020.
For Thames Water and the 15 million customers it serves who are forced to pay the bills the regulator sets for them, it looks like just another case of rip-off Britain.