The Blazing Saddles defence at Thames Water

“One false move and the business gets it” might be Chris Weston’s equivalent to the funniest scene in Mel Brooks’ brilliant 1974 movie. Give us a stonking price rise or Thames Water is “uninvestable” and, well, nobody will ever lend us a penny ever again, and you’ll be sorry. The company’s CEO did not put it quite like that in his begging letter to Ofwat, the water regulator, ahead of this week’s pricing proposal for the next five years, but the meaning is clear enough.

He wants forgiveness for past sins (of his predecessors) and a price regime to turn from uninvestable to investable at the expense of captive customers who have already paid once. By “investable” he means terms for new money which allow attractive monopoly profits. You have to admire his chutzpah.

This high-stakes poker game has a way to run yet, and Mr Weston is essentially saying that unless he gets his 59 per cent (plus inflation) rise in London’s water bills by 2030, nobody will put up the billions needed to clean up from the rivers to the sea. This really is so much hogwash.

Thames has been systematically destabilised over many years. A decade ago its balance sheet was already too weak to support the financing of the Thames supersewer, as the private equity owners were busy replacing risk equity with debt, taking large dividends and minimising capital investment. Today the equity is worth only option value and the £15 billion of debt threatens to overwhelm the business. Mr Weston reckons it runs out of money a (curiously precise) 11 months from now.

Now the equity is gone, the next in line are the bondholders and lenders. They should take a severe haircut for lending to an unstable business. Of course, the individuals in the banks who authorised such poor lending will have long since moved on, leaving a different department to pick up the pieces. The lenders will argue that forcing losses onto them will jeopardise Thames’ and the City’s credit standing. They know that it won’t. Converting half (say) of that £15bn into equity would transform the balance sheet, and plenty of banks – perhaps even the same ones – would rush in with fresh capital. Price rises for customers are inevitable, but 59 per cent really is taking the liquid sewage.

You can hardly blame Mr Weston for trying it on. The blame should attach to Ofwat and the new Labour government if between them they let him get away with it.