Material cultures of water financialisation in England and Wales

Abstract

The ownership structure of the water and sewerage sector has changed substantially in England and Wales since the ten companies were listed on the London Stock Exchange in 1989. The majority of firms are now de-listed and a number of companies are now owned by financial investors via special purpose vehicles. In some cases, revenue streams from customer water bills have become securitised for decades into the future to raise funds for investment but also to finance distributions to shareholders. The high financing costs associated with these highly-leveraged corporate structures are passed on to customers. The regulator, Ofwat, tasked with protecting the interests of consumers, operates largely within a system of price controls intended to mimic a competitive market in the absence of financial speculation. This means that regulation steers away from intervening in the financialised corporate structures that have emerged around some of the water utilities. These manifestations of financialisation are considered to be 'market outcomes'. This paper explores the discourses and narratives that have developed in the provision of water in England and Wales to create a situation where such rentier transfers are normalised. Using the systems of provision approach, the paper shows that the material culture of water finance has been constructed along narrow lines with superficial consumer consultation while extensive financial engineering to increase shareholder returns continues unimpeded.

Financialization, water governance, and uneven development

“…Moreover, the huge investment for such infrastructure provided by private equity carries implication not only for the increase in public debt but also for the shift in decision‐making processes toward shareholder interest. The difficulty to harness processes of financialization, due to its specific characteristics of fragmentation, speed and opacity, into a regulatory regime implies its deeply undemocratic tendencies . We develop this argument by the implications of lack of transparency, regulatory deficit, and uneven development on public accountability and social and environmental justice.…”

Integrating what and for whom? Financialisation and the Thames Tideway Tunnel

“…However, water remains a fundamentally uncooperative commodity (Bakker, 2003) and the process of financialisation within the water sector remains uneven and complicated (for the most up-to-date review of recent work on the financialisation of water, see Ahlers and Merme, 2016). Indeed, as Bayliss (2014Bayliss ( , 2015 demonstrates, water itself is far less likely to be financialised than water services or the infrastructure through which water services are provided. A range of financial products has, therefore, developed around both water and its attendant infrastructures, including water-targeted investment funds; structured water products within major investment banks; water indexes; or exchange traded funds.…”

“…Furthermore, since its acquisition by Macquarie, Thames Water and its many subsidiaries and parent companies have paid almost no corporate tax to the UK government (Allen and Pryke, 2013;Bayliss, 2015) provoking considerable anger. Following the publication of its 2012 results, OFWAT's chairman noted that Thames' actions might well be legal 'but some aspects are morally questionable in a vital public service' (Houlder et al, 2013).…”

“…Crucially, the utility's owner changed from the German energy firm RWE to a collection of investors led by the Australian investment bank Macquarie. The Macquarie Group's purchase of Thames resulted in a fundamental change in the company's business model (Allen and Pryke, 2013;Bayliss, 2015;Loftus and March, 2016): long-term company debt increased from £1.6 billion in 2005 to £10 billion; and over the same period dividend payments totalled £1.875 billion (Plimmer, 2016).…”

Financializing Desalination: Rethinking the Returns of Big Infrastructure

“…On the role of financialization in the water sector, March and Purcell () have focused on the complicated role of finance in shaping the recent investment decisions of Aguas de Barcelona, whereas Allen and Pryke () have focused on the ‘financialisation of household water’ in the case of Thames Water. Bayliss (; ) has provided a more detailed study of the role played by financialization in relation to a range of different water and sewerage companies in England and Wales. Applying the systems of provision approach to the water sector in England and Wales, Bayliss () notes that water quality and quantity has improved since privatization in 1989; however, she argues that such improvements have come about through a massive increase in consumer bills.…”