Prem Sikka

Thames Water’s Prospective New Owner Donated $1 Million to Trump’s Inauguration

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Original article by Sam Bright and Adam Barnett republished from DeSmog.

U.S. President Donald Trump next to the Thames Water and KKR logos. DeSmog collage. Credit: Gage Skidmore / Thames Water / KKR

The U.S. private equity firm KKR, which has been selected as the ‘preferred bidder’ for the takeover of Thames Water, gave a seven-figure sum to Donald Trump’s inauguration committee, DeSmog can report.

Official records show that Kohlberg Kravis Roberts Co LP (KKR) donated $1 million to the Trump Vance Inaugural Committee on 7 January. The committee is appointed by the president-elect to arrange the inauguration ceremony, when a U.S. president is formally sworn into office.

The embattled London-based utilities provider Thames Water, in debt to the tune of £20 billion, is attempting to secure new investment to save it from nationalisation. In March, KKR was granted preferred bidder status, giving it a 10-week period to raise the equity to buy the water company.

KKR is reported to have lodged an initial £4 billion bid in exchange for a majority stake in Thames Water, which serves 16 million customers.

However, campaigners have raised concerns about KKR’s suitability to own Thames Water, given its financial ties to Trump.

“KKR recently donated $1 million to the inauguration fund of President Trump, a man who has repeatedly called the climate crisis a hoax,” said Matthew Topham, lead campaigner at the pro-nationalisation campaign group We Own It. “Let’s not kid ourselves that this company will swoop in and clean up our rivers and lakes.

“The government has ducked the issue for too long – special administration to slash the rotten debt, then full public ownership, is the only way to reverse this catastrophe.”

The new Trump administration has initiated a bonfire of clean air and water regulations – rules that were set to save the lives of 200,000 people according to The Guardian. Gina McCarthy, chair of the Environmental Protection Agency (EPA) under former U.S. President Barack Obama, said the announcement of the mass rollbacks was the “most disastrous day in EPA history”. During his first term, from 2017 to 2021, Trump repealed more than 100 environmental regulations.

Since being inaugurated for a second time, Trump has pledged to once again withdraw the U.S. from the flagship 2015 Paris Agreement, which set an international target for limiting global warming, and has declared a “national energy emergency” to allow the U.S. to “drill, baby, drill” for new fossil fuels. 

KKR’s prospective ownership of a vital public utility has also been questioned on the basis of the U.S. firm’s business model. Private equity firms – which buy and restructure companies – are known to cut costs, and increase prices for consumers, in order to maximise their profits.

KKR was infamously dubbed the “Barbarians at the Gate” in the late 1980s for its takeover of U.S. conglomerate RJR Nabisco.

“It beggars belief that anyone could seriously think this is a business model and owner who will truly fix the crisis at Thames Water,” said Mathew Lawrence, director of the think tank Common Wealth. “It is exactly the behaviour of loading Thames Water up with debt, extracting money, and underinvesting that has led us to this point. What is needed is long-term stewardship, patient investment, and putting the public and our water system first for once – not the interests of elite financial firms.”

These sentiments were reflected in Parliament this week, through a House of Lords address by Labour peer Prem Sikka. “Thames Water was put on the road to ruin by private equity,” he said. “Now its shareholders have designated KKR, another private equity group, as their preferred bidder. KKR’s business model is profiteering, high leverage, low investment, asset stripping and high cash extraction. That will inevitably multiply Thames’s problems.”

KKR and Thames Water were approached for comment.

Debt and Donations

Thames Water’s debt ballooned under the ownership of Australian private equity firm Macquarie, increasing from £3.4 billion in 2006 to £10.8 billion when the firm sold its stake in 2017.

During Macquarie’s ownership of Thames Water, the private equity firm extracted roughly £2.7 billion in dividends and a further £2.2 billion in loans. Despite this, Macquarie has recently said that it is “very proud” of its ownership record.

KKR’s preliminary bid proposed a mechanism that would allow the holders of Thames Water debt – including the U.S. hedge fund Elliott Management – to become Thames Water shareholders.

Elliott Management is an activist hedge fund that recently built up a large stake in BP and has urged the British fossil fuel major to ditch a number of its green commitments. BP’s profits recently dropped by 48 percent amid this pivot back to oil and gas. The hedge fund is run by Paul Singer, who also donated $1 million to Trump’s inauguration committee.

Turning around the performance of Thames Water will take considerable investment and business acumen. Thames Water reported a 40 percent increase in pollution incidents in the first half of 2024, while the firm has been allowed to raise customer bills by 35 percent on average over the upcoming years. Senior KKR Europe executive Johannes Huth said last year that water bills must rise to boost investment in ageing infrastructure.

KKR also has a 25 percent stake in Northumbrian Water, which it acquired in 2022.

KKR’s Connections

In addition to its donation to Trump’s inauguration fund, KKR has other ties to fossil fuels and those who oppose climate action.

Analysis by the investigative group Private Equity Climate Risks published in April 2024 reported that KKR has a large fossil fuel portfolio, with 188 assets in 21 countries.

KKR has also created a $50 billion fund with Energy Capital Partners to invest in artificial intelligence (AI) data centre energy infrastructure. Data centres are heavily energy intensive, and DeSmog recently revealed that AI executives have told major polluters that the nascent industry can keep fossil fuels alive.

KKR is also the co-owner of Marshall Wace, a hedge fund co-founded by UK media baron Paul Marshall, holding a 39.9 percent stake as of June 2023. The same month, Marshall Wace reported investments of at least £1.8 billion in fossil fuels companies, including in the oil and gas giants Shell, Chevron, and Equinor.

Marshall is the co-owner of GB News, a broadcaster that has frequently given a platform to climate falsehoods, and is an opponent of policies to reach net zero emissions.

Speaking at a conference in February hosted by the Alliance for Responsible Citizenship (ARC), a group funded by Marshall, he said that the UK’s net zero plans are “leading the way in wrecking our industrial base”, “impoverishing people”, “sacrificing our energy security”, and “sacrificing our ancient rural landscape.”

The UK’s net zero sector is growing at three times the rate of the rest of the economy, according to the Confederation of British Industry (CBI).

DeSmog also revealed that Warren Stephens, Trump’s ambassador to the UK, donated $4 million to the president’s inauguration fund on the day that he was nominated for the diplomatic position.

The inauguration committee raised a record $239 million, including from fossil fuel giants Chevron ($2 million), ExxonMobil ($1 million), the U.S. branches of BP and Shell ($500,000 each), and Valero ($250,000).

Original article by Sam Bright and Adam Barnett republished from DeSmog.

Continue ReadingThames Water’s Prospective New Owner Donated $1 Million to Trump’s Inauguration

Fossil Fuel Giants to Lavish Shareholders With Record Paydays as Climate Crisis Deepens

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Original article by JULIA CONLEY republished from Common Dreams under Creative Commons (CC BY-NC-ND 3.0). 

Greenpeace activists display a billboard during a protest outside Shell headquarters on July 27, 2023 in London.  (Photo: Handout/Chris J. Ratcliffe for Greenpeace via Getty Images)

“The global energy crisis has been a giant cash grab for fossil fuel firms,” said one campaigner. “And instead of investing their record profits in clean energy, these companies are doubling down on oil, gas, and shareholder payouts.”

The year 2023 was marked by weather events that made it increasingly clear that the Earth has entered what United Nations Secretary General António Guterres called the “era of global boiling,” with wildfires and prolonged heatwaves impacting millions of people and scientists confirming their suffering was the direct result of fossil fuel extraction and planetary heating.

But for the world’s five largest oil giants, the year marked record profits and the approval of several major new fossil fuel projects, allowing the companies to lavish their shareholders with payouts that are expected to exceed $100 billion—signaling that executives have little anxiety that demand for their products will fall, said one economist.

The companies—BP, Shell, Chevron,ExxonMobil, and TotalEnergies—spent $104 billion on shareholder payouts in 2022, and are expected to reward investors with even more in buybacks and dividends for 2023, The Guardian reported.

Shell announced plans in November to pay investors at least $23 billion—more than six times the amount it planned to spend on renewable energy projects—while BP promised shareholders a 10% raise in dividends and Chevron could exceed the $75 billion stock buyback it announced early last year.

Alice Harrison, a campaigner for Global Witness, noted that fossil fuel shareholders will be enjoying their paydays as households across Europe struggle with fuel poverty and the world faces the rising threat of climate disasters brought on by the industry.

“The global energy crisis has been a giant cash grab for fossil fuel firms,” Harrison told The Guardian. “And instead of investing their record profits in clean energy, these companies are doubling down on oil, gas, and shareholder payouts. Yet again millions of families won’t be able to afford to heat their homes this winter, and countries around the world will continue to suffer the extreme weather events of climate collapse. This is the fossil fuel economy, and it’s rigged in favor of the rich.”

In 2023 campaigners intensified their demands for accountability from the oil, gas, and coal industries, and as of last month had successfully pressured more than 1,600 universities, pension funds, and other institutions to divest from fossil fuels. In the U.S., provisions in the Inflation Reduction Act, which has been touted as the “largest investment in climate and energy in American history,” went into effect.

But Dieter Helm, a professor of economic policy at the University of Oxford, The Guardian that if the industry were truly fearful of policymakers phasing out fossil fuel extraction and expediting a transition to renewable sources, they would be spending far less on new projects and shareholder payouts.

“For this to be the case you would have to believe that the energy transition is happening, and that demand for fossil fuels is going to fall,” Helm told The Guardian.

In 2023, U.S. President Joe Biden infuriated climate campaigners by approving the Willow oil drilling project in Alaska, which could lead to roughly 280 million metric tons of heat-trapping carbon dioxide emissions. His administration also included in a debt limit deal language that would expedite the approval of the Mountain Valley Pipeline, which could emit the equivalent of more than 89 million metric tons of carbon dioxide, while the U.K. government greenlit a massive oil drilling field in the North Sea and French company TotalEnergies continued to construct the 900-mile-long East African Crude Oil Pipeline, which would transport up to 230,000 barrels of crude oil per day.

“These companies are investing a huge amount in new projects, and they’re handing out bigger dividends because they are confident that they’re going to make big returns,” Helm said. “And when we look at the state of our current climate progress, who’s to say they’re wrong?”

Climate campaigner Vanessa Nakate pointed out that the shareholder paydays are expected following a deal on a loss and damage fund at the 28th annual United Nations Climate Change Conference, aimed at helping developing countries to fight the climate emergency. That fund was hailed as “historic” and included a commitment of $700 million from wealthy countries—a sum that is expected to be dwarfed by fossil fuel investors’ profits.

“They have picked people’s pockets, fueled inflation and pollution, and deepened poverty,” U.K. House of Lords member and Tax Justice Network co-founder Prem Sikka said of the oil giants. “Governments do nothing to end their monopolistic control. Need to break-up this cartel.”

Original article by JULIA CONLEY republished from Common Dreams under Creative Commons (CC BY-NC-ND 3.0). 

Continue ReadingFossil Fuel Giants to Lavish Shareholders With Record Paydays as Climate Crisis Deepens

Here’s why the accounts of water companies are deceptive and need investigating

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https://leftfootforward.org/2023/08/heres-why-the-accounts-of-water-companies-are-deceptive-and-need-investigating/

Parliamentary committees need to investigate water company accounting, especially as they are continuing with the practices that brought down Carillion.

Image of a burst water main.
Image of a burst water main.

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

Ever since its privatisation in 1989, the water and sewage industry in England and Wales has set new standards in ripping people off.

Profits are made by not plugging water leaks and by dumping tons of sewage in rivers and seas. More than one trillion litres of water is lost to leaks from crumbling pipes each year. In 2022, raw sewage was dumped into rivers and seas 824 times a day, nearly 301,000 times a year over 1.75m hours. Despite higher demand, no new reservoirs have been built since privatisation. With captive customers and no competition, companies have hiked charges by 40% in real terms. The biggest winners are shareholders. More than 90% of the nine water companies are owned by overseas investors.

Since privatisation, companies have paid £72bn in dividends and another £15bn is expected by the 2030. These are largely funded by over £60bn of debt. To soothe public anxieties, Ministers claim that since 1989 water companies have invested £190bn. Such claims need to be treated with caution as the companies have a history of murky accounting practices.

Thames Water is England’s’ biggest water company. Since 2010, it has been sanctioned 92 times by the regulators and paid fines of £163m. Since privatisation, it has paid £7.2bn in dividends and has debts of around £14bn.

Taking cue from the water company, in June 2023 a Minister told parliament  that “Thames Water itself has not paid any dividends for the last six year”.  Of course, water companies are not operating as not-for-profit organisations and are masters of financial engineering and obfuscation.

Page 43 of the company’s 2022-23 financial report describes £45m payment (£37m for 2022) to its immediate parent company Thames Water Utilities Holdings Limited as “dividend” which then forwards it to Thames Water Utilities Limited and is still described as “dividend”. The same page then claims that it is not really a dividend because its purpose is to “solely to service debt obligations and group related costs of other companies within the wider Kemble Water Group”. Page 22 of the 2022 accounts of Thames Water Utilities Holdings Limited shows “Dividend Income” of £37.1m. Anything described as a “dividend” in the accounts is a dividend and in the last two years alone this amounts to £82m (£45m + £37m). Since privatisation, vast amounts are likely to have travelled via this route to the company’s ultimate controllers but are not included in the £7.2m of dividends.

Yorkshire Water is also engaged in sleight of hands. Since 2010, it has paid £1.2bn in dividends and claims to have stopped paying dividends from 2017-18. However, page 137 of its 2022-23 financial report states that the company paid £62.3m “dividends” to its parent company. Its 2021-22 accounts (page 99) state that “the Board of Yorkshire Water has approved the payment of £52.6m in dividends.”

… [article continues discussing Water companies’ financial obfuscation.]

https://leftfootforward.org/2023/08/heres-why-the-accounts-of-water-companies-are-deceptive-and-need-investigating/

Continue ReadingHere’s why the accounts of water companies are deceptive and need investigating