BT’s pension fund lost £300mn on Thames Water
One of UK’s biggest private schemes wrote off stake in beleaguered utility in 2024
BT’s pension scheme lost £300mn after writing off its stake in Thames Water, in its first confirmation of losses sustained from its investment in the UK water company that is struggling under its £20bn debt pile.
The size of the loss — which occurred following a decision to write off its 8.7 per cent stake in the UK’s largest water company in 2024 — was confirmed to analysts in a meeting on Monday, according to a video released by BT. The company said in the same meeting that the pension scheme had sold some of its debt in Thames Water, but did not give specifics.
The disclosure comes as BT approaches the triennial valuation of the pension scheme, set for next week, which will fix payments the London-listed company must make for the next three years to help fund payouts made to an estimated 213,000 retired employees.
The £33.2bn BT pension scheme, which was closed to new members in 2001 and to future accrual in 2018, pays out about £2.9bn in benefits each year. BTPS is currently managed by Brightwell Pensions and is one of the UK’s largest private-sector single-employer pension schemes.
BT said during its annual results in May that its pension deficit stood at £4.2bn, up from £4.1bn a year prior, partly due to returns being lower than expected. The company put about £800mn into the pension fund in deficit payments in the last financial year.
The writedown on Thames Water is unlikely to increase the annual amount paid when the deficit is assessed next week, according to a person familiar with the company.
BT declined to specify when the £300mn loss on Thames Water had been booked. The pension scheme assets returned £569mn less than it had expected in the last financial year, according to BT’s annual report.
The pension fund wrote off the value of its stake in Thames Water’s parent company, Kemble Water. BTPS was one of a number of investors to make a similar move after the financial crisis at the utility began to escalate in 2024.
Equity investors at the time included a Singapore-registered subsidiary of Thames Water’s then-biggest shareholder, Ontario Municipal Employees Retirement System, and the UK’s Universities Superannuation Scheme.
The equity write-off precipitated a chain of events that led to Thames Water falling into the hands of its lenders, including hedge fund Elliott Management and private capital group Apollo Global Management.
The senior creditors have been locked in negotiations with water regulator Ofwat for more than a year as they attempt to take formal ownership of the UK’s largest water provider. Those senior lenders own the majority of the utility’s £20bn debt pile.
Ofwat needs to decide on whether to sign off on the creditors’ deal soon as the utility is expected to run out of cash by October, and any deal would need to be put to a public consultation and approved by the courts.
The agreement with creditors would prevent the company from being brought under the government’s special administration regime — a form of temporary nationalisation.
But the creditor deal has drawn scrutiny from politicians in recent weeks, with the UK’s environment secretary warning that the plan could place an “undue burden” on consumers.
An Andy Burnham-led government may also complicate the decision-making process as the former mayor of Greater Manchester, who is expected to replace Sir Keir Starmer as the UK’s prime minister, has previously said there is “a very strong case” for renationalising Thames Water.
Brightwell declined to comment.