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28 March 2024

Thames Water: an update on our investment

You may have seen the recent media coverage concerning shareholder funding for Thames Water. This followed regulatory announcements made by Thames Water and Kemble (Thames Water’s ultimate holding company, in which USS is a shareholder) on Thursday 28 March 2024.

I want to reassure that this will have no significant or material impact on USS's funding position or the security of our members’ promised pensions. Our globally diversified approach to investing ensures we’re not overly exposed to any one single investment. That limits the impact any single investment might have on our funding position.

The value we placed on Thames Water at the end of March 2023 is fully reflected in our latest actuarial valuation which, as you may well know, reported an estimated £7.4bn surplus in respect of the £73.1bn defined benefit part of the scheme (the Retirement Income Builder) and resulted in lower contributions from January 2024 and improved benefits from April 2024.

It wouldn’t be appropriate for us to provide a running commentary on Thames Water and there are legal and regulatory constraints that limit what we can say publicly. But I can share the statement issued on behalf of all shareholders:

“Shareholders and Thames Water have been working with the regulator Ofwat for over a year on how to address the complex challenges facing the business. These include both meeting current funding demands and the urgent need for substantial investment to improve performance.

“These discussions led to the submission of a business plan which included the largest ever investment programme by any UK water company – over £18 billion – to improve customer service and environmental standards. To support such unprecedented investment, shareholders committed to supporting a further £3.25 billion of investment on top of the £500 million provided last year, and pledged to take no cash out of the business until a turnaround was delivered. This was a solution which addresses the root cause of Thames Water’s challenges without the need for any taxpayer funding.

“However, after more than a year of negotiations with the regulator, Ofwat has not been prepared to provide the necessary regulatory support for a business plan which ultimately addresses the issues that Thames Water faces. As a result, shareholders are not in a position to provide further funding to Thames Water.

“Shareholders will work constructively with Thames Water, Ofwat and Government on how to address the consequences of Ofwat’s decision.”

Simon Pilcher
Chief Executive
USS Investment Management Limited