WATER PLCS: CAPITAL STRUCTURE PROPOSALS (Hansard, 18 May 1989)

§ The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh)

Subject to the approval by Parliament of the Water Bill, the Government will put in place new capital structures appropriate for the nominated holding companies in the private sector. This will be done in the run up to flotation and implemented by extinguishing all the national loans fund (NLF) debt and taking new securities which may consist of both equity and new debt. The assets of the NLF will be reduced accordingly, but the Government will have new assets in the form of securities in the holding companies for England and Wales. The capital structure of each of the holding companies will be determined in the light of the circumstances of that company. It is too soon to say what the market value of the Government's securities in each holding company will be at the time of flotation. The total value of these securities implied by the share price of the equity sold will depend on market conditions at the time. It may or may not cover the book value of funds now invested in each business. The Government will, however, choose a capital structure calculated to ensure a proper return to the Exchequer and hence the taxpayer and that the industry is in a position fully to meet its obligations. In the meantime the Government will continue to meet the industry's requirements for capital from the national loans funds.