Thames Water needs a clean start after being swamped with huge debts, says ALEX BRUMMER

The labyrinthine ownership structure at Thames Water is something to behold.

At this stage in its existence as a privatized utility, the issue is no longer how this financial complexity has been able to spread, but how best to dismantle it.

Much of the debate currently centers on how the holding company plans to repay a £190 million loan on April 30, largely thanks to Chinese lenders.

Major shareholders, including the Ontario Municipal Employees Retirement System, the Abu Dhabi Investment Authority and the UK Universities Superannuation Scheme, have essentially said enough is enough. No cash will be made available unless regulator Ofwat agrees that water bills could rise by 40 percent in five years from 2025.

That is seen as the starting point for the £19 billion of further upgrades needed over the coming decades.

Those of us who live in London and have lived through the threat of the Thames, which has dug up our roads, disrupted traffic flows and left a huge mess, would be happy never to see another water project.

All kinds of suggestions are being made to break the impasse. If you’ve ever wondered what investment bankers do, it’s worth getting your hands on JP Morgan’s corporate refinancing pick lists and flowcharts. It looks like something from a NASA rocket launch.

Several years have passed since I was invited to a breakfast meeting by a very senior Ofwat official, who wanted to assure me that the days of extensive ownership and tax-evading debt structures for the Cayman Islands water companies were over.

The Cayman Islands may have been removed, but impenetrable debt pyramids remain. Critics of the debacle suggest that restoring state ownership to the country’s largest water supplier is the solution.

In the public sector, Thames would have to compete for money with the NHS and pensioners.

It would face the same uncertainties as other infrastructure projects such as HS2 and risk the same kind of gross incompetence, sheer bloodlust and cover-up as the Post Office.

Yet a short period under ‘special administration’ could be the best solution.

The first task would be to dismantle the multi-layered ownership structure and inject transparency into what is going on.

Next would be a realistic plan to increase investment in modern pipes and pumping stations, end water wastage and dumping of feces in waterways.

Finally, all parties must share the pain. Debt holders must, as with any reorganization, apply a write-down. Shareholders are in it for the long term and must be willing to build more equity and all 9 million consumers (except the poorest) must be willing to pay for cleaner water and a cleaner environment.

Greece dragged itself back to prosperity after the 2010 euro crisis through enormous state and personal sacrifices in exchange for debt cancellation. All Thames Water stakeholders need to take a bath.

Wrong tone

Vodafone investors (including this writer) may need a merger with CK Hutchison-owned Three to boost revenues and profits. But certainly not consumers.

It was always likely, even if solutions were proposed, that the £15 billion tie-up would lead to a major investigation by the Competition & Markets Authority.

The idea that the merger will boost competition and investment, as the companies claim, is nonsense. Fewer networks will encourage higher prices, reduce service and reduce the supply of capital.

It would also undermine the challenge of smaller players such as Sky Mobile, Tesco Mobile and smaller High Street names such as Lebara.

Vodafone should think again.

Boxing smart

Independence remains the best long-term choice for all stakeholders at British packaging innovator DS Smith.

If, as seems likely, a bidding war means the country will be taken over, then International Paper seems the best choice.

As first reported on these pages, the buyer promises that DS Smith will effectively become the headquarters for its international paper business in Europe.

And to reflect its importance to Britain, there will be a secondary listing in London.

That sets a useful precedent.