This is a very naive reading of the situation - it almost comes across as twisting in knots to avoid placing the blame on the responsible party: the company and its owners who were responsible for this.
> Your options are to acquire appreciating assets quicker than your competitor, or you get left behind.
This is wrong twice over! First of all, they are effectively monopolies, they have no competitors in their industry. The only thing they are competing against is which company can extract money the fastest (at the expense of the company and English citizens). Second of all, from the article, they aren't spending the raised money on capital investments.
> For example, South East Water—thousands of whose customers were left without running water this summer—spent more on dividends and servicing its debt than on infrastructure in the two years to March 2022. Water bills for Britain as a whole have increased by around 360%, more than double the rate of inflation, since privatisation. Over that time, annual capital investment by the ten largest water and sewage companies has fallen by some 15%, according to research by the Financial Times (FT).
Privatization is an utter failure here, just as would be predicted given the situation, and it's crazy to see an attempt to rationalize it away.
> This is wrong twice over! First of all, they are effectively monopolies, they have no competitors in their industry. The only thing they are competing against is which company can extract money the fastest (at the expense of the company and English citizens).
I think that's what the poster above was trying to say - they're not competing for customers, they're competing for investors. Effectively their only products are ROI and share value.
And when I say it out loud, I get a little shock, as I realize how much all industries are trending that way. No matter how consumer-facing your business is, the real competition is for capital investment. Consumers had better hope that capital investment depends on their happiness, because if it doesn't, their happiness is going to slide far down the priority ladder.
The irony is we might all be complicit in supporting this dynamic by choosing to invest in whichever 401k/pension fund option offers the highest returns and lowest expense ratios.
Utility companies in Illinois are private & can only charge X% (10% for electrical) more than they invest. Frankly, the power & rail network here are amazing, in large part because that system incentivizes maximum reinvestment as they can then charge more money and return larger amounts to share holders.
Competitors who take large loans and fail to deliver are out competed by alternatives who went a more efficient route.
The profit margins are fixed, but everything is still competitive.
>The only thing they are competing against is which company can extract money the fastest (at the expense of the company and English citizens). Second of all, from the article, they aren't spending the raised money on capital investments.
The owners of the company are competing with others in society to buy land/houses/cars/services/etc.
If the owners want cash they can do the same thing, take out a loan vs the value of the stock to buy more X. The advantage when a company does it is your liability stops at the value of the stock where leverage isn’t.
Except, not every investor wants every investment to be highly leveraged in this way. The entire point of utilities in most peoples portfolios is as very stable dividend stocks. It’s the people running the company who have incentives to do these kinds of transactions.
> Your options are to acquire appreciating assets quicker than your competitor, or you get left behind.
This is wrong twice over! First of all, they are effectively monopolies, they have no competitors in their industry. The only thing they are competing against is which company can extract money the fastest (at the expense of the company and English citizens). Second of all, from the article, they aren't spending the raised money on capital investments.
> For example, South East Water—thousands of whose customers were left without running water this summer—spent more on dividends and servicing its debt than on infrastructure in the two years to March 2022. Water bills for Britain as a whole have increased by around 360%, more than double the rate of inflation, since privatisation. Over that time, annual capital investment by the ten largest water and sewage companies has fallen by some 15%, according to research by the Financial Times (FT).
Privatization is an utter failure here, just as would be predicted given the situation, and it's crazy to see an attempt to rationalize it away.