One of England’s top-rated water companies is using an accounting trick to artificially inflate its balance sheet by more than a billion pounds, BBC Panorama has discovered.
Severn Trent Water claims that an investment is worth £1.68bn in its accounts, when in reality it has no value to the overall business. The made-up money makes the company appear more financially robust and helps to support its bumper payouts to shareholders.
The water company, regulated by Ofwat, has been awarded the Environment Agency’s top four-star rating for environmental performance for a record five consecutive years.
However, some of its customers are unhappy, wanting more of the company’s earnings to be used to combat pollution in local rivers.
The complex accounting trick involves a shell company called Trimpley, with no money or assets, buying another company for £3bn. Draycote, the ultimate parent company, has agreed to pay Trimpley an IOU (interest on an unsecured debt note) with the principal still outstanding. Since then, the IOU has received interest payments and is currently valued at £3.68bn, according to the company’s 2023/24 accounts.
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