Canadian export agency ‘hit by big losses after lending to Thames Water’

Canada’s state-backed export credit agency is reportedly nursing steep losses after lending debt-ridden Thames Water as much as a billion Canadian dollars.

The British utility, which has said it could run out of cash by next June , received five loans from Export Development Canada (EDC) between 2018 and 2022 after the Canadian pension fund Omers had invested. The total value of the loans were between C$750m and C$1.45bn (between £422m and £820m), EDC said, while declining to give an exact figure.

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. It 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.

EDC said it had given five loans to Thames Water since 2018, including two in 2022. It declined to give exact amounts for the loans, instead indicating the approximate size of each one – suggesting the company lent Thames Water between C$750m and C$1.45bn.

In all 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.

EDC declined to comment on whether it had lost money. A spokesperson said: “EDC has 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.

“A significant part of our focus when we provide business support to international entities is to create opportunities for Canadian exporters to become part of their supply chains. Through our business relationship with Thames Water, we facilitated more than 30 introductions for Canadian companies to Thames Water, the vast majority of which have been Canadian cleantech firms.”

EDC said it would not speculate on any specific debt disposals.

Thames Water declined to comment.