Hedge funds betting against UK water firms as debt levels soar

Hedge funds are betting against Britain’s listed utilities after a cash crisis at Thames Water highlighted soaring debt levels across the industry.

New York firm Millennium has taken a short position on supplier United Utilities, which has been accused of dumping sewage in the Lake District.

While Arrowstreet, based in Boston, has disclosed a short position on Pennon Group, which owns South West Water and Bristol Water.

Meanwhile, the debt of Southern Water and Yorkshire Water has also been targeted, according to a Bloomberg report. It comes as Thames Water scrambles to finalise a fresh rescue plan.

Britain’s biggest water firm, which serves millions of households in London and the South East, is set to publish a five-year spending plan tomorrow.

Sewage scandal: Comedian Steve Coogan (pictured), the creator of Alan Partridge, joined protestors outside United Utilities’ Lake District offices this week

The plans could include taking on extra debt, according to reports.

The firm, which already has an £18billion debt pile, plunged into crisis this month when shareholders refused to hand over £500million amid a row with regulator Ofwat.

Thames wanted to hike customers’ bills by 40 per cent to fund an £18.7billion investment plan but Ofwat blocked the rise.

Taxpayers could foot the bill if the Government is forced to bail out Thames, which is facing administration if it cannot raise fresh funds by the end of next year.

Parent company Kemble has defaulted on a £400million loan and warned it will miss a repayment deadline on another £190million loan this month.

Elsewhere, United Utilities is embroiled in a scandal after being accused of dumping sewage in Lake Windermere. Campaigners say the beauty spot’s water has turned green with ‘toxic’ levels of algae.

Comedian Steve Coogan, the creator of Alan Partridge, joined protesters outside its Lake District offices this week.

Activists have hit out at the company’s decision to pay record dividends.

United said it ‘shares the concerns’ about ‘the overflow operations and the impact on local water courses. We’re already investing to tackle this problem.’

United was the worst water firm for sewage spills last year, partly due to its large number of storm overflow outlets – with a total of 97,537 last year.

Spills lasted for a total of 650,014 hours, up from 425,491 the previous year.