‘Vampire kangaroo’: Macquarie boss defends management of debt-ridden Thames Water

Original Article:

Source: Link

The Macquarie chief executive, Shemara Wikramanayake, has delivered a fervent defence of the company’s former stewardship of ailing utility Thames Water, labelling its management of debt levels as prudent and bemoaning the investment bank’s UK nickname, the “vampire kangaroo”. Wikramanayake told shareholders Britain’s ageing infrastructure required significant investment that would best be delivered by the private sector. “We have a Victorian-era pipe system that is unable to cope with the levels of storm water falling now in the UK, especially with urbanisation and paving over grasslands,” Wikramanayake told shareholders in Sydney on Thursday. “Government balance sheets are stretched; private capital is where the solution can come from.” A Macquarie-led consortium owned Thames Water from 2006 to 2017 in what turned out to be a profitable investment in a former public utility. But the water company is now struggling under £14bn (A$26bn) of debt, a large portion of which was accumulated during Macquarie’s ownership, leaving UK officials to draw up contingency plans in case it needs to be temporarily renationalised. Britain’s largest water utility, which serves 15 million people and has regularly leaked large quantities of untreated sewage, secured £750m (A$1.4bn) of funding from existing investors on top of £500m (A$960m) received earlier this year. But it still needs significant further capital to improve its infrastructure and cut debt. Thames Water is now the most indebted water company rated by Standard & Poor’s, with leverage exceeding 80%. A Thames Water sewage lorry is called out to Henley on Thames after a blocked sewer caused a spill out of a manhole. Photograph: Geoffrey Swaine/Shutterstock Macquarie has consistently defended the debt it accumulated, noting that the asset retained an investment grade rating during its ownership. It has said criticism of the debt size needs to take into account the overall value of the water asset. Wikramanayake told shareholders it was disappointing that parts of the UK media now referred to Macquarie as a “vampire kangaroo”, which is a term that draws on the company’s Australian origins along with allegations of aggressive asset stripping. The moniker also references the infamous “vampire squid” nickname given to Goldman Sachs. “All of our teams are really looking to drive better community outcomes, create greater value in areas where we have deep expertise and through that, generate asset value that can be shared with all stakeholders,” Wikramanayake said. “We’re committed to doing that in the UK and other areas.” The Sydney-headquartered Macquarie has significant interests in the UK, which includes a majority stake in another utility, Southern Water. The defence of Macquarie’s management of its former UK asset represented a rare and lengthy intervention into the politically sensitive issue by the chief executive. The comments were made in response to a question from activist shareholder Stephen Mayne, citing past coverage from the Guardian. Macquarie has had enormous success buying public infrastructure and placing it in its funds, where it can charge fees, and receive dividends, as well as enjoy any increase in the asset price. It has also enjoyed recent success in its commodities business, earning the head of that division, Nick O’Kane, A$57.6m over a 12-month period, which is more than the chief executive’s salary. Shareholders recorded a near 20% protest vote against Macquarie’s remuneration report at the general meeting in a notable sign of opposition to its large pay packets.