Canada’s state-backed export credit agency is reportedly nursing steep losses after lending debt-ridden Thames Water hundreds of millions of pounds.
The British utility, which has said it could run out of cash by next June, received two loans from Export Development Canada (EDC) in 2018 and 2019 at the behest of the Canadian pension fund Omers.
EDC sold the loans at a deep discount in recent weeks, according to the Financial Times, which cited unnamed investors.
Thames Water has been pushed to the brink of collapse in recent months after struggling under the weight of debts built up over years by successive owners and could fall into government-handled administration if it fails to find new financing within the next 10 months.
Its difficulties have caused ripples across global finance, with Canadian investors among those hit hard. Omers, a pension fund for public sector employees in Ontario, wrote down the value of its 31% equity stake to zero in May.
Thames has been forced to accept regulatory oversight from an independent monitor after losing its investment-grade credit rating – a breach of its licencing conditions.
The UK’s largest water company, which provides water and runs sewers for 16 million customers in London and the Thames Valley, has faced sustained criticism over leaky pipes, sewage dumping in rivers and dividends paid out via its opaque financial structure to previous shareholders.
EDC was set up in 1944 as a state-owned company whose job is to help Canadian companies to export. Documents published on its website show that it gave between C$100m and C$250m (between £56m and £141m) in financing for “support for Canadian direct investment abroad” on 22 March 2018. The same records a year later show financing of between C$250m and C$500m.
In both cases the money was received by Thames Water Utilities Ltd, the regulated subsidiary of the water company. Omers Infrastructure is named as the Canadian company involved.
The FT reported that EDC sold loans worth more than £600m over the last two months, citing investors, with one of the transactions matching the date of the Thames Water financing.
In a statement provided to the FT, EDC said: “We have been carefully following the recent challenges encountered by the utility and with the regulator’s recent determination and Omers’ decision to write down its stake, we are assessing the best course of action to manage our loan exposure with the company.
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“As part of careful management of our financing portfolio, we have processes in place to address these situations and minimise impacts to EDC.”
The company said that it would not speculate on any specific debt disposals.
EDC has been contacted for comment. Thames Water declined to comment.
