FINANCIAL BACKGROUND
by Cllr. Roger Bird of Havant Matters.org

How does 20% of Southern Water’s income get passed to their funders?
The backdoor route through which Southern Water are paying their funders has been exposed by Councillor Roger Bird, an accountant and Fareham Borough Councillor, at an event in Waterlooville hosted by Suella Braverman. The Fareham MP made her objection to the effluent recycling plan clear. 
​
Southern Water own a subsidiary company called “SW Finance I PLC” which they pay 20% of their income to, paying off ‘interest’ on a bond. Income that was primarily raised through us paying our water bills. For every £5 of income, £1 is paid to Bondholders. That’s the best part of £300 million pounds a year in interest Southern Water have repeatedly asserted that they have not paid a dividend to its shareholders since 2017. They may not have paid it, but they do still owe them £15.8 million.
​
The main cost of funding infrastructure projects is paid for with a form of debt called a Bond. The issue is that these Bonds are very large and the debt is not free – debt never is. The largest Bond is for six billion pounds. That’s about four times SW’s annual revenue.
​
In SW’s accounts there is a helpful breakdown of the company’s income and costs. From this one can see that for every £5 of income, £1 is paid to Bondholders. That’s the best part of £300 million pounds a year in interest, using up 20% of Southern Water’s income!
​
These Bonds are traded on bond markets, just as shares are on the Stock Exchange. SW have pointed out that anyone can buy these Bonds, entitling them to receive the interest which the company pays. Although complex, all this is totally legal. But it does illustrate where a large part of our money goes to!

Financial Times  ‘Privatised Companies Escape Scrutiny’  - Gill Plimmer 27th Feb 2025
 
Although Ofwat requires companies to self-report annually on metrics including mains repairs, sewer collapses and unplanned water outages, these only track failures, rather than measuring the condition of assets, it said. In addition companies “do not appear to have comprehensive asset maps or asset health information”. 

The replacement rate for infrastructure is also low, the report found. The majority of mains pipes were built prior to privatisation and their replacement rate has decreased significantly since 2008. The replacement rate for water mains is 0.1 per cent annually, 10 times lower than the European average, while the replacement rate for wastewater assets is 0.2 per cent, three times lower than the European average of 0.6 per cent, according to the report.